Amazon is one of the world’s most fundamentally sound stocks. But despite publishing the good results, the stock price drastically fell. The reasons for this fall could be the mayhem in the Chinese IT and education sectors, the profit bookings forced by the delta variant news or even a game played by the operator.
Amazon.com is definitely a buy-on-dip stock. Technically we could have a dip in our hands. Let’s understand how we got a dip here.
If the market participants expect the results to be good, they take stock prices to higher levels with good volumes. From point X to A the stock price had risen 10% breaking the strong supply zone.
Whenever a strong supply zone is broken it becomes a strong demand zone and price comes down to test it. The price came down to point B and bounced to point C. It came down to test again but this time to take on the strong demand zone it opened with a gap-down.
The gap down below this zone removed the bullish participants by triggering long unwinding and bears also gained power. Now bulls will wait until the price reaches the demand zone or a dip. At the dip, if bulls gain power it triggers short covering thus kicking bears out. The dip may be at point D.
The point D we got here is the terminal bar price of the bullish butterfly pattern, which is a fib ratio of 1.618.
This point D lies in an old demand zone that has been tested several times. Historically whenever the price went down this demand zone, it fell by 10% and then rose back. But when it bounced back rose by 10% and a maximum of 18%.
The take profit levels for butterfly pattern will be 0.618 fib retracement of CD and can be trailed up to 1.272 fib retracement.
Buy at 3185 (point D) with SL placed at 3043(SL for butterfly pattern @fib ratio 2)
Reward >= (3511-3185) = 326
Risk = (3185-3043) = 142
RR>= 2.23
Buy at some qty at 3185 and average the price with some more qty if the price reaches 3043 to 2880 zone with SL of day closing price below 2880.
Points to be considered
1) The volumes are lower than the 20 moving average since the major gap-down.
2) RSI is at 28 indicating the stock is oversold.
3) The stock price trading in the demand zone with lower volumes could be a sign of a pullback.
As the markets are down due to early tapering news, these levels may not work.
If you want to be absolutely sure then wait for the price to break out in either direction with good volumes, then consider your position.
Please consult your financial advisor before investing.
Amazon.com is definitely a buy-on-dip stock. Technically we could have a dip in our hands. Let’s understand how we got a dip here.
If the market participants expect the results to be good, they take stock prices to higher levels with good volumes. From point X to A the stock price had risen 10% breaking the strong supply zone.
Whenever a strong supply zone is broken it becomes a strong demand zone and price comes down to test it. The price came down to point B and bounced to point C. It came down to test again but this time to take on the strong demand zone it opened with a gap-down.
The gap down below this zone removed the bullish participants by triggering long unwinding and bears also gained power. Now bulls will wait until the price reaches the demand zone or a dip. At the dip, if bulls gain power it triggers short covering thus kicking bears out. The dip may be at point D.
The point D we got here is the terminal bar price of the bullish butterfly pattern, which is a fib ratio of 1.618.
This point D lies in an old demand zone that has been tested several times. Historically whenever the price went down this demand zone, it fell by 10% and then rose back. But when it bounced back rose by 10% and a maximum of 18%.
The take profit levels for butterfly pattern will be 0.618 fib retracement of CD and can be trailed up to 1.272 fib retracement.
Buy at 3185 (point D) with SL placed at 3043(SL for butterfly pattern @fib ratio 2)
Reward >= (3511-3185) = 326
Risk = (3185-3043) = 142
RR>= 2.23
Buy at some qty at 3185 and average the price with some more qty if the price reaches 3043 to 2880 zone with SL of day closing price below 2880.
Points to be considered
1) The volumes are lower than the 20 moving average since the major gap-down.
2) RSI is at 28 indicating the stock is oversold.
3) The stock price trading in the demand zone with lower volumes could be a sign of a pullback.
As the markets are down due to early tapering news, these levels may not work.
If you want to be absolutely sure then wait for the price to break out in either direction with good volumes, then consider your position.
Please consult your financial advisor before investing.
Trade active:
As analyzed the reversal signs are shown at point D. Almost 4% up from 3185 level.
Trade active:
1st target reached. Giving 10.5% profit currently. :)
