Amazon: Three Quick Fade Trades

There is very little wrong fundamentally with Amazon. The financial statement and the balance sheet could, arguably, support a +50% forward multiple. The stock is up over 34% in the last month with powerful volume.

On the technical side of the equation, however, the stock is overbought (not a revelation) and may be showing signs of a potential short term pullback. This first chart illustrates a measured "target" move from the trough breakout we saw in September projecting to the current 130 area. A goal achieved in record time. [See chart]

On a shorter timeframe the 30 minute chart reveals an interesting series of higher highs and higher lows with the RSI and MacD in bearish divergence. [See chart]

The inclination might be to buy the reversions to the trendline or the 50 period moving average and sell on the open the next day. That is one way to work it but the strategy requires you to hold the position overnight (not recommended).

A second option is to fade the open. It's pretty clear that a strong open has been sold for the last week and has established the important uptrend line. This would require a close eye on volume, a close eye on relevant one period reversal candle patterns and some great trading skills and/or luck.

The final and preferred plan is to wait for two consecutive closes below the trendline on the 30 minute chart and enter short. This trade has a very limited time horizon and a quick profit should be booked, quickly, as should a quick loss.

Amazon is not a stock to be shorted lightly and only the most nimble of traders using a strict "battle plan" with expendable capital should enter the fray.

Disclosure: Short Amazon

Comments

[Don50:]

after opex amzn will be back around or under a $100

Nov 14 08:27 AM

[Robert Moreno:]

If you're having a problem linking to the first chart, try this: stockcharts.com/h-sc/u...

Nov 14 12:12 PM