The first chart is the daily timeframe for AMZN. After last week's earnings gap, AMZN carved out a bearish tweezer top candlestick reversal pattern. I've been waiting patiently all week for a chance to short AMZN and today was the big payday.Yesterday AMZN gapped down but had a relatively orderly, NR day. Today it gapped up on the open, and like the markets, it was a fade. The WOR held support of yesterday's lower base. It consolidated in the lower portion of the OR and set up a perfect dummy short before falling like a hot knife through butter. There was a brief moment where I thought this was a head fake. After breaking down close to a dollar, AMZN snapped back and rallied all the way back up to the BO point. It numbed me briefly and I thought I would be stopped out. But after a quick retest of the breakout point, it fell down as planned. Whew! It fell four points in less than 45 minutes before capitulating on huge volume.
As indicated on the 15 minute chart, I used the high of the tweezer top as the high for my Fibonacci extension and the ORL as my base. I wanted to use the Fibs as my guide even though there is no gap down per se. Based on my analysis of the daily chart, the tweezer top seemed like the most logical starting point.
There is still more opportunity here as AMZN has yet to fill the earnings gap, after which, I fully expect it to bounce.
6 comments:
Jamie,
Have you looked at BIDU? The stock has an earning big gap as well. Would you please give your thoughts on shorting BIDU?
Thank you,
Nicki
Nicki,
BIDU is still holding its 10 DMA so it's still an A List stock. $200.00 is a PP and psychologically significant level. The next support level from there is $192.00, followed by $185.85 which closes the gap. Resistance is $204.75.
Yesterday we had a NR inside bar and today we had price and volume expansion, although volume was not aggressive.
Low risk, high quality setups at the base of PPs are shortable, however, the daily chart for BIDU is not as obvious as AMZN. It could be argued that the stock is just consolidating the earnings gap. That said, if the markets continue to sell off, BIDU will follow.
Jamie,
Are you using 15 minute charts more often because of recent volatility? or like X they are more consistent over the long term. I like the 1 minute and 5 minute myself. cheers
It's easier for me to spot a good setup on the 15 minute timeframe. However, I do use the lower timeframes in order to have more precision in my entries. I also prefer to manage the trade from the 15, otherwise I might be tempted to exit prematurely. I have three timeframes for each stock on my screen usually 15, 5 and either 3 or 1.
Jamie,
Thanks for your reply. I used to love the 15 minute candles (I still like'em), though I tended to get whipsawed more than I do with the 1 and 5 minute. I'd see a great setup on a 15 and realize later that maybe one or two minutes would account for the entire length of the bar thereby creating distortion. By referencing as you do to shorter timeframes for a lower risk entry helped my p&l quite a bit. I find that when the one minute bars are undergoing consolidation and shortening in length (being aware of pivots, support, and resistance), I tend to trade better. For some crazy reason the one minute bars are easier for me to interpret price action. In addition, I tend to be as patient for 1 minute setups to materialize as I am with the 5's, 10's and 15's. I'm not a scalper. My trades using the 1 minute candles amount to 10-20 trades per week. I'd say that my win rate is 70-30 compared to 55-45 when I traded 15 minute candles (based on last 10 months when I made the transition). The only possible answer I have for my improvement is that I'm viewing the one minute bars in chunks as they approach or don't approach a potential trade. I should add that the 5 EMA is a valued component. I'd sure be interested to hear your comments or anyone elses if they've had this experience (that is, improved performance with the one minute candle) My comments are related to intraday setups (breakouts, base and break, etc.) Thanks again, and keep up the great work on your blog! Cheers, George
George,
Thanks for sharing. I will incorporate the occasional lower timeframe charts in my trade analysis going forward. There are many important clues on the lower timeframes that are not visible on the 15 minute as you noted. I'm sure that many new traders could benefit from drilling down to the lower levels when they trade.
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