Monday, June 01, 2009

Focus List Trade -, Inc. (Public, NASDAQ:AMZN)

The markets gapped open this morning on impressive overseas gains and better than expected pre-market spending data. Everything was moving so fast, it was hard to get in. I took a low risk entry on AMZN using the 5 minute timeframe - NRIB at base of round $ level. I exited when it stalled just shy of the 100% FE of the PDL to the base.

AMZN consolidated and managed to rally well beyond the FE target, but it was exhausted and carved out a huge shooting star, setting up a late day short.

A reader asks - AMZN - coiling as MAs converge. What is the importance of MAs converge in general and in AMZN case?

When prices coil at an area of MA convergence, the BO can be extremely powerful as we see from the NKE chart below. Once price broke out of the base, the MAs start to separate like a bow tie.

AMZN looks good on the break of resistance at blue line $80.00 entry point. However, if we look at a wide range view of the daily (last chart), we see a lot of resistance at this level. Normally, the BO of the coiling/MA convergence zone is the best place to initiate a swing trade, but because this rally is long in the tooth, last night we said we don't recommend any new long swings at this time.

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