Perhaps This Will Be A Monday To Remember (Amazon Short)
Updated
Posting this AMZN short setup in advance of the market open for Monday August 26th 2019. We already have a red futures - this almost always indicates an initial selloff. Sometimes the market bounces back after this initial selloff, but so many equities are in such precarious technical positions that they may not be able to withstand the selling volume from traders who will be looking to reduce risk at this point. I am of the opinion that it's really time for stock holders (particularly in those shares that have increased astronomically in the last few years) to take some substantial profit off the table.
Since my first AMZN chart in January, the double-top scenario played out pretty perfectly. Confirmation will occur if the low from the first rejection is breached. As you can see in the lefthand chart, Amazon already broke the logarithmic trend and tested it as resistance (orange). This tells us that growth for company shares is at least slowing down. The price has not experienced a true correction yet though. I think it's very possible that the bear market for many stocks begins tomorrow. On the righthand chart, you can see that on the linear chart, AMZN is just barely supported by an important rising trendline (light blue). A break below it would indicate to traders that the top may indeed be in, but first I think price will need to retest the low 1500 area. If that breaks (red X), the top will likely be confirmed, and the parabolic nature of the gains from the last few years will become obvious. I think it's very possible to see an erasure of all the gains since Trump's election in 2016. This means AMZN shares could decline all the way back to $288. Of course I'm getting ahead of myself here. We have to see if the supports outlined in pink hold first, as there are multiple levels to where Amazon can fall. We really have to see how the market, Trump, the media, and general public react to a selloff.
I think we could be in for a pretty red Monday if sentiment can't turn around tonight and these technical supports are broken. The setup would be to short the breakdown and potential retest of this light blue trendline and target (initially) the 1500 zone. If that breaks, the other potential supports are shown in pink.
A note about risk/reward: There is still some potential upside in stocks, but that possibility seems to be diminishing by the day. As outlined in my DJI fractal analysis, the stock market had a final "mania" phase before the Great Depression. I would honestly prefer if this did not happen to that extent in this cycle, as the fallout from that would likely be far worse. I'd prefer the market to drop now. It would appear much healthier, although I still think it could be substantially worse than 2008, based on the parabolic nature of the recent growth. In a way, it's been like a "mini-mania." Anyway, people who buy stocks at current prices are betting on what they think would likely be the final hurrah (if there is one). Due to this, most people don't expect more than one more rally for stocks before a deep correction. This is based on all the conversations I've had with investors, family members, and friends. Logically, if most people don't expect more than one rally, the risk/reward favors people who sell at current prices, because once the top is reached, prices will ultimately end up below where they are now (even if the top is substantially higher), since most people will be aiming to get out at that point. This is what causes a "blow off" phase.
Anyway, this was longer than I meant it to be. Other stock analyses are listed at bottom, along with my Great Depression fractal. This is not financial advice! Shorting the market has been very risky, since people have been trying very hard to support current prices. If one were trading this, risk management is key. Please consult a professional financial advisor (which I am not). As always, analysis is about weighing possibilities. It's not about getting it right 100% of the time, but about understanding how the herd behaves based on visual cues given to them as trends on a chart.
Good luck out there! It's pretty nuts.
-Victor Cobra
Since my first AMZN chart in January, the double-top scenario played out pretty perfectly. Confirmation will occur if the low from the first rejection is breached. As you can see in the lefthand chart, Amazon already broke the logarithmic trend and tested it as resistance (orange). This tells us that growth for company shares is at least slowing down. The price has not experienced a true correction yet though. I think it's very possible that the bear market for many stocks begins tomorrow. On the righthand chart, you can see that on the linear chart, AMZN is just barely supported by an important rising trendline (light blue). A break below it would indicate to traders that the top may indeed be in, but first I think price will need to retest the low 1500 area. If that breaks (red X), the top will likely be confirmed, and the parabolic nature of the gains from the last few years will become obvious. I think it's very possible to see an erasure of all the gains since Trump's election in 2016. This means AMZN shares could decline all the way back to $288. Of course I'm getting ahead of myself here. We have to see if the supports outlined in pink hold first, as there are multiple levels to where Amazon can fall. We really have to see how the market, Trump, the media, and general public react to a selloff.
I think we could be in for a pretty red Monday if sentiment can't turn around tonight and these technical supports are broken. The setup would be to short the breakdown and potential retest of this light blue trendline and target (initially) the 1500 zone. If that breaks, the other potential supports are shown in pink.
A note about risk/reward: There is still some potential upside in stocks, but that possibility seems to be diminishing by the day. As outlined in my DJI fractal analysis, the stock market had a final "mania" phase before the Great Depression. I would honestly prefer if this did not happen to that extent in this cycle, as the fallout from that would likely be far worse. I'd prefer the market to drop now. It would appear much healthier, although I still think it could be substantially worse than 2008, based on the parabolic nature of the recent growth. In a way, it's been like a "mini-mania." Anyway, people who buy stocks at current prices are betting on what they think would likely be the final hurrah (if there is one). Due to this, most people don't expect more than one more rally for stocks before a deep correction. This is based on all the conversations I've had with investors, family members, and friends. Logically, if most people don't expect more than one rally, the risk/reward favors people who sell at current prices, because once the top is reached, prices will ultimately end up below where they are now (even if the top is substantially higher), since most people will be aiming to get out at that point. This is what causes a "blow off" phase.
Anyway, this was longer than I meant it to be. Other stock analyses are listed at bottom, along with my Great Depression fractal. This is not financial advice! Shorting the market has been very risky, since people have been trying very hard to support current prices. If one were trading this, risk management is key. Please consult a professional financial advisor (which I am not). As always, analysis is about weighing possibilities. It's not about getting it right 100% of the time, but about understanding how the herd behaves based on visual cues given to them as trends on a chart.
Good luck out there! It's pretty nuts.
-Victor Cobra
Note
It seems that futures have reversed at the last minute. Perhaps we'll have to wait for the support to be broken.Note
If this little bounce gets aggressively sold, it could be indication that the market has really turned quite risk-averse. This would mean that selling pressure has continued to increase, as things get pushed towards bearish territory.Note
Well, it's been a month and still no breakdown here. Amazon is carefully holding on the trend. It should be noted that Netflix has already broken its parabolic trendline. Note
Looks like this is finally starting to play out.
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