Hi Traders! Amazon forecast update and follow up is here. On May 26th I shared this “Amazon Technical Analysis And Forecast” post in my blog. In this post, let’s do a recap of this setup and see how it has developed now. If you would like to learn more about the way we trade and the technical analysis we use then check out the Traders Academy Club. Spoiler alert – free memberships are available!
On the H4 chart we have a bearish divergence that has formed between the first high that has formed at 3431.55 and the second high that has formed at 3552.20 based on the MACD indicator. The price then moved lower and broke below the last low at 3300.92 thus forming a classical setup of bearish divergence followed by bearish convergence, we may consider this as evidence of bearish pressure. As per the book scenario after a bearish convergence we may expect corrections and then further continuation lower. Currently it looks like a correction is happening and until the strong resistance zone (marked in red) shown in the image below holds my short term view remains bearish here and I expect the price to move lower further.
Amazon H4(4 Hours) Chart Current Scenario
On the H4 chart my view was bearish and I was expecting the price to move lower further until the strong resistance zone holds. The price action didn’t follow my analysis here and this idea failed as the price moved higher and broke above the strong resistance zone and is currently holding above it. I see this as contradictory sign opposing the bearish view. Thus the bearish view has got invalidated here, my current view on Amazon is neutral.
So traders, this is why I wanted to show this example to help you understand why we should always trade based on the facts and hints provided by the market and take the right actions according to that. Even though we had facts supporting the bearish view here, the price didn’t hold below the strong resistance zone, the price moved higher and provided a valid breakout above the strong resistance zone and is currently holding above it which I see as a contradictory sign. You should always keep in mind that losses are part of trading we can’t expect every trade to go as per our plan and provide us profits. In trading, we can’t avoid losses but in order to be successful in trading, we should know how to cut losses early and how to manage the trade when the price goes in the opposite direction. When you see contradictory sign like this opposing our view then it is always recommended to cut your losses early and get out of the trade.
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