Consider the current environment. Every day leads to a fresh all time high.
The question heard most often in the financial and social media context is, can this continue?
Wednesday we pointed to sector strength as our catalyst. Today we will look at sectors again, through the lens of 52 week highs. The video below has no audio, so you don’t have to adjust your volume. Note the verticality in the HLP ratios for each sector. HLP compares 52 highs and 52 week lows as a cumulative percent. Rising is obviously bullish, where demand outstrips supply. That said, extremes do lead to reversion to mean……..
We are looking for a scalp in AMZN, among others. What will trigger our entries?
First lets look at the chart we posted the day after earnings. Our thoughts were; Fibonacci confluence zones might lend for support at 23.6 (November through January pivots) and 38.2 (January pivots). This is represented by the blue shaded horizontal area respectively. RSI was at 50. We thought we could bounce here. MACD was crossing but still above the zero line (no signal). STO was at 50.
Additionally, it was out “opinion” that institutions would support the stock.
Hindsight being 20/20, we were proven correct in our assumptions. The days following AMZN earnings garnered more bullish sentiment than bearish. Price was/is back above the 9/20ema daily.
Now we see a quadruple top. RSI still has room to run and price remains above the 9/20ema. MACD is showing a trend towards bullish momentum “continuation”, while stochastic is overbought. With this in mind, lets look at the 5 minute chart.
Scalping Amazon is straight forward. The strategy is pointed out on the 5 minute chart below. When price moves above the 9/20ema, look for confirmation signals to go long. Stay long until price drops below the 9ema. Stop if it drops below the 20ema.
Since the daily chart is at resistance a breakout would see a lot of short covering. Stops would logically be in the vicinity of 850 (+/-).
Given the 52 week highs video above, we have to consider the extremes. Futures are mildly negative. Amazon is trading (-0.70) as we go to print.
Good luck today!
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