Last Update: 4.17.13
3.16.13 – Bearish Divergence (weekly) chart updated
3.16.13 – *Bonus Chart* Weekly bear flag chart added
3.16.13 – Volume Must Confirmed the Trend (monthly) updated
4.17.13 – Monthly Bearish Divergence chart added
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2.1.13 Friday
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1. Fibonacci Expansion Resistance (Daily)
Measured from $208 (6/1/12’s low=0%) to $263.50 (9/14/12’s high=100%) and expansion variable 138.2% at the top of the recent move of $285.
2. Double Top Reversal (Daily)
What we have currently isn’t a textbook Double Top reversal however the effect could be similar as it hit the ceiling twice and failed miserably. I called this one, “Instant Double Top”.
3. Bearish Divergence (Daily)
We have confirmed bearish divergence on the oscillators (Stoch, RSI, MFI). *They are not clean Peak to Peak divergence but the sentiment of the divergence is there.
4. Bearish Divergence (Weekly)
(Weekly MACD – updated 3.16.13)
This is a CLEAN and PERFECT MACD Divergence with PEAK TO PEAK divergence in formation. This type of divergence carries so much higher potency (compare to divergence with many peaks) when it comes to divergence that actually plays out.
(Weekly Stock, RSI, MFI – updated 3.16.13)
We now have fully confirmed weekly bearish divergence on Stoch, RSI, MACD and MFI on this weekly chart. Out of these 4 indicators, MACD is the most important one as it is the Moving Average Convergence Divergence indicator that specifically measures divergences. As you can see on the MACD Study chart that we have fully confirmed bearish divergence with blue line starting to (Ever so slightly) pointing down. That would be the first step of confirmation. Obviously we would need to see some progress of follow through next few weeks but the early signal is definitely bearish.
5. Reversal Candle I (Weekly)
Bearish Engulfing reversal is in place on the weekly chart (week ended today so its a finalized candle) with high volume. That long volume spike indicates the potency and the seriousness of that candle.
6. Reversal Candle II (Monthly)
Shooting Star reversal formed on the monthly chart. Month has ended yesterday so this is a finalized candle. Take a look at this chart though. Last 6 years, we have not seen any Shooting Star candle which is the strongest bearish reversal candle in single candle analysis.
7. Volume Must Confirm the Trend (Monthly)
(chart updated 3.16.13)
Stock went up, volume dried up, stock declined. Expecting 2-3 months of bearish correction.
*Bonus Chart* Weekly Bear Flag Confirming
(chart added 3.16.13)
It has been total of 6 weeks of grinding higher while volume has been declining thus formed this unusually long bear flag. For second there I thought this bear flag was going to never play out (especially seeing the long white candle last week but as you can see last week’s white candle was not backed up by volume and this week, bears rushed in). Sellers rushed in and took over the lead last few days to end the week with dark candle on this weekly chart. For this bear flag to be completely confirmed, we would need to see $AMZN closing below $264 level after Friday EOD (finalizing the candle)
*Bonus Chart II* Daily DownTrend Channel Established
(Chart added 4.17.13)
These downtrend channel could be a lethal sign when it happens at the top of it’s long term bullish trend. Also we have so many other bearish reversal indications to add to the fuel. We don’t know how long it’s going to continue to oscillate in this channel area but once it breaks below out of that lower channel support, I expect fast downside movement.
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(Daily) First Target: $240-$235
200SMA (pink) is traveling together with long term uptrend support (red line). This is a double confirmation that this level will act as strong support.
(Weekly) Second Target: $220
Weekly 100SMA (light grayish blue) and the weekly uptrend support (4 years of worth) are traveling together. This is also a double confirmation that this level will act as strong support.
(Daily) Ultimately: $200
To fill the entire gap from 4/26/12
Fib Retracement Zone Confirms $220 and $200 (Weekly)
Fib Retracement zone confirms previously presented analysis on those possible support levels.
If Monthly Divergence Confirms: $170
(Chart added 4.17.13)
This monthly MACD divergence is not yet confirmed but close. We will need to see the fast line (blue) to cross the red line to the downside and once the crossover is confirmed, that’s when this monthly divergence will be confirmed.
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Key Signs of Major Correction
Pay attention to those daily and weekly bearish divergences. Similar situation happened on $AAPL when it was trading at $700. $AAPL had confirmed daily bearish divergence which later we had weekly bearish divergence confirmed after it started to roll over. Last time when $AMZN had confirmed weekly bearish divergence, it lost about $70 points in month and half. This time we are forming another weekly bearish divergence that has already been confirmed with daily divergence, I think 80 point drop to $200 isn’t extreme in my opinion.
Also monthly chart with declining volume is troubling as trend must be confirmed with volume (Dow theory). I prose $200 as ultimate target but we could find some support on any of those major supports I have mentioned above. Take heed and be cautious.
Thank you so much Kim ! I had sent the limit cover price at$ 238.78 right now. will discuss with you later about it..wish you have a nice weekend and enjoy the super bowl time !!!
Really good info Kay. A 101 on aspects of bearish divergence analysis . I read several times to be sure I got it. Thank you for sharing your analysis.
Currently my own chart work is limited to what charts I may find free online. So with that, I have no monthly charting and very limited history but from your example I see it is a useful tool. Kay Is there a pay charting program you feel comfortable recommending? I expect to purchase something next month to help with my own analysis.
@LittleRiver you dont need pay charting program if you are still learning the game. These free charting will do everything u need to do. tradingview.com freestockcharts.com Think or Swim Trading platform TD Ameritrade StrategyDesk. I see many pros use one of these free charts so research those and see if you can find one that works for you.
@2kaykim Thank you Kay . Spent the afternoon playing with all of them . I see what you mean. They all offered a better view than the one I was currently using. I will have to use them all more this week to settle on the one I am most comfortable with. Thanks again for taking time to help a newbie.
Hi Kim, I like how you look at the daily, weekly, and even monthly to do your analyze, too bad we don’t see divergence in the MACD because is the most important divergence indicator. The market is so bullish right now. My question is, if you do see some bearish signal in Amazon, will you still short it with the market at all time high? thanks
@Lelandtradesmart yes that is true MACD is most important on the divergence. We do have pretty steep weekly MACD divergence that is about to play out so probably the other indicators (on daily) divergence might lead the way. I am currently holding puts since Friday open. What I like to do is I get small position just to test the water and as it progresses, I add to my positions unless I Get stopped out. With this much reversal signals, I wouldn’t care where the market is currently. Plus market is way extended in my opinion (check my weekly market update). When I shorted AAPL since 9/28/12, market was very bullish but I was very aggressive with my aapl Puts because of so much reversal signal it had at that time. With amazn though, we do have quiet a lot of supports on the way down so I might be more cautious with my potiions but once it starts to tank, I will get in heavy.
@2kaykim small positions first, that’s great to know. thanks man
go to @Fibline on ST and he had posted his analysis on $SPY with his note that ” $SPY bearish MACD divergence to be aware of. setting up nicely pullback here.” …without Kim @Fibline is other very best tech analysts on ST that I ‘would love to following with… no doubt that the market is SO BULLISH right now. but how long and how far this fast train could keep moving without any traffic??? too many stocks has had traded in their all time high so far and that will cost depression in near term on entire market. if its happen then $AMZN would not trade in good shape with its highest P/E rate forever.
@followkim yes good observation. Yes I do agree with FIbline’s bearish MACD divergence on SPY and all other MARKET INDEXES. https://2tradersclub.com/2013/01/27/weekly-market-update-djia-spx-compq-3/ you can see my analysis here. No one knows when or how market is going to roll over so I continue to remain bullish in the overall market until it gives me some kind of reversal signal. But I do believe the market is stretched and at least corrective move is in stored. and if or when the market start to roll over, it wil only fuel $AMZN’s bearish outlook.
2Kay, nice work dude! I started the Fibo retrace from 11/16 while you went much farther back. I wanted to get more recent data. See any flaws with my logic? Also, check out the weekly chart w/ a EMA 50 / 20. Engulf candle on 10/8 indicated the decline down to the EMA 50 (shadow of hammer on 10/22). AMZN has an upward SMA line so I have multiple stops when comparing it to the Fib resist levels to SMA. Which ones do you prioritize? For example, do you put more weight on the Fibo over the SMA?
@sbha30 Fib is only to reference certain levels. I dont every trade off of fib. thnx for your comment
Kim agreed with you that no one knows what gonna be next move of the market…but as you pointed the market is stretched and at least corrective move is in stored and that based on the difference indicators so far…. The liquidity accumulator continued down on the 30th indicating more selling. the negative divergence is developing when the market keep rising to its higher high that showed investors are taking profits since last week. $AMZN volume was pick up when its price traded big drop at the past few days that could tells the institutional are selling. Just wait more patience and hold on my short position. Thank you for your very professional analysis and that really help me lot to learn and to developing my trading skill at the future!
@2kaykim Bro, just a question on your Fib level. To get an Fib expansion we take lowest low which is $208 (6/1/12′s low=0%) connect that to highest high $263.50 (9/14/12′s high=100%) and then connect to higher low(retracement level) which is $225(11/15/12). Thats how we get the right Fib expansion. if we do this way we dont get your level u discribed in your article…
@solonik then u r not doing it right…
@2kaykim Check this out there is a nice chart how to get Fib expansion. http://fxcodebase.com/wiki/index.php/Fibonacci_Expansion#Drawing_Fibonacci_Expansion
@2kaykim how to draw*
looks like tough to break 50 sma at least for now
@ramssaran we might have short bounce to 10/20EMA but not expecting much after except continue in bearish trend
Kay,
I see Amzn seemingly making positive divergence on 60m. Do you expect that it will retest $270-280 before another nose dive.
If i were to buy put at $267, how would you place your stop? I would place my target around $240. I find it difficult to set a stop because if I place too tight to be safe, I always get stopped out early. Thanks.
@drerichu yea i see positive divergence on the hourly. Yea we might get up to $270ish to retest. Worst case $275 but I don’t think its gonna get up to $280. Stops have to be placed above or below solid pivot area and also make sure stock to freely move. Since AMZN being more of volatile stock, u gotta give it some breathing room. for your qustion, I would put stop at around $270
Dear Kay,
I’m still holding April 260put got in when it was 267. I could have book a profit when it was 255 but instead now it bounced up against 270 and I m in risk of stopping out. Should I move my stop up to accommodate this move. Look at the hourly and daily chart could u comment on Amzn near term n a month from now? Thx.
@drerichu didn;t get to ur comment until now.. currently it looks like $257 has been served as strong support, we need to break below that before more bears coming out.. From today’s action (low volume and possible hammer), I think we might get 2 days of slow upwards movment. Not sure if you are still in your positions but we might even get up to test $270 area…
in the end, the market leaders fal last so its hard to really nail the leaders
Glad I didn’t short this amazon…it’s has only worked out twice in history very well. Once in 08 and the other when it first hit 200’s and went back to mid 100’s. Anyways, where do you see amazon going from today’s bullish candle. Do you think it retests the highs as the market keeps strolling higher? Google seems to be wanting 850’s, maybe it will top there.
@Killerfunpizza1 https://2tradersclub.com/2013/02/20/i-faced-amzn-bulls-head-on-today/ just updated my journal. Well im still standing behind my analysis unless it breaks above and close above $285 with high volume.
KIm, still stay the same page with your analysis on AMZN, also I have the exactly same reason for why I haven’t cover my short when there has some profits to take that just as you said…..Thank you for taking the time to sharing your insights clearly the best 🙂
AMZN trading between 260 and 280. If it gets anywhere near 280 again, it will start buying puts.
Zex_M19 with today’s gap down the chance of it getting up to 280 level has been diminished. we keep that gap open rest of the week, I am pretty confident that its heading lower however if the gap is filled by tomorrow or early next week, possibility of it getting back up to 280 is possible again.
2kaykim Zex_M19 Hey any chance you see follow through selling tomorrow?
justinfo4 I do see some follow through tomorrow. Looking at the weekly chart, we could even have big flush tomorrow but i wont be surprised to see some slow down action like a spinning top candle.
I was waiting for your post and Thanks I got it… excellent analysis on $AMZN….I have had limit buy-cover my short position (after I shorted it ) price is $226.18. also agreed with you on $FB and $AAPL and my price of buy FB at $22.56. will wait more patient to trade with $AAPL again , as you pointed $360 is the price for me to jump in for real invest the company again. other wise will just trade for short term. Thanks again. Good night!
Hi Kay, I were to follow your swing trades with options in the future, how far out should we look at for the expiration date? Thx.
eu4ria03 30-60days out with in the money options.