I last wrote about AMZN back on September 12, 2017, (click here) … the gist of that update was that I thought the longer-dated charts were possibly entering into at best consolidation pattern that would likely lead to no better than market performance, but that the smaller time frames were actually showing a nice bull-flag that was about to break.
I did catch a nice intra-day trade that next day, but since that breakout failed after one day, I have been monitoring whether or not we were beginning that bigger distribution pattern. I am updating my view of AMZN today because if my view is correct and we are likely forming a large distribution pattern going forward here with AMZN, then it is possible that we have just completed an expanding flat corrective pattern off of the first push lower. Here are the charts …
AMZN – Daily Chart #1
If that large spike higher back in July was an actual exhaustion move that will turn out to be a Head & Shoulder topping pattern in AMZN, then traders need to be aware that the current move of AMZN off of its new lower-low made on Aug 29th, is likely just an expanded flat corrective bounce that will fail in the SLOT resistance zone.
Price has just pushed into the SLOT and crossed the 50% level. The “C” wave of that corrective move has also just exceeded the high of Wave A, and that follows Wave B slightly exceeding the beginning of the entire corrective move. Therefore, this corrective price action (i.e., overlapping price action), has met the legal definition of an expanding flat price pattern.
AMZN – Daily Chart #2
C-waves will often reach into the 1.272x – 1.618x extension target of the B-wave … by definition, all the C-wave needs to do is exceed the high made on the A-wave, which we have done beginning last Thursday.
AMZN – 195 Minute Chart
Here is a closer look at the corrective pattern (expanding flat) … expanding flats are typically 3-3-5 patterns. I see that exact set-up here, and that is why I am going to be hawking AMZN a little closer as I day trade it here this week. Earnings are scheduled for October 26th, and I might look at selling some far out-of-the money call spreads going into that date on any bullish days up until the 26th.
If the earnings and/or the guidance are disappointing, I will look for spots to initiate shorts via options and/or outright stock positions.
Cheers … Leaf_West
P.s. I actually just started a bearish option position by starting a November monthly expiry put 1000/980 spread position. I paid $8.72 and my max upside is $11.28 for a reward/risk ratio of 1.29x. That is good enough here to start things off