Are you a prime member of Amazon (AMZN)? Here’s your trade. (April 30, 2015)
Amazon ( NASDAQ:AMZN ) is what I wanted to point to today. This is a stock that gapped up, looked a lot like Netflix ( NASDAQ:NFLX ), right? Gapped up. Netflix ( NASDAQ:NFLX ) though, trickled up a bit the next day. Okay, great! Netflix ( NASDAQ:NFLX ) has been holding, it’s been holding this level here, certainly down at 534.00, but you can see how this stock is actually holding at a higher level.
Amazon ( NASDAQ:AMZN ) didn’t do that, there was no follow through the next day. Although make note of this, there was a little fakeout. Lets look and see what the NASDAQ did that day; it gapped up. The NASDAQ gaps up that day and ultimately sells off. Amazon ( NASDAQ:AMZN ) gapped up that day; gaps up a percent, sucks a bunch of bulls in and then spits them out.
The point is this: when you see a stock that’s up this much, you’ve got to be selling into this. It was right to even be selling Netflix ( NASDAQ:NFLX ) because the stock just trickled sideways. But with Amazon ( NASDAQ:AMZN ), this is a clear break of new support and the stock is now coming back to earth, probably faster than one of those bozo drones that’s going to be delivering packages; as long as it’s not up above my house.
So here’s what you want to do: first of all set a price alert. If you don’t want to put stops in that’s fine. But when a stock does this, when it’s up so much on a point basis, and here’s a percentage basis as well, at least put a stop just a little bit under that level and know if that stop gets hit that’s your “oh crap” level. That means that everybody who bought, everybody who bought on this day, everybody who bought is a loser. If you’re inside this box you’re actually in the red and you’re not happy.
So as soon as this stop gets hit what happens? This stock continues lower, and I’m giving you pearls, so watch for more selling. What’s the catalyst for somebody to say, “Wow! 421.78 that’s the price I’ve been waiting for. Finally it’s time for me to step in and buy Amazon ( NASDAQ:AMZN ). What a deal! It’s like I’m a Prime member only on Wall Street.” No. I hope this stock goes lower because I’ve sold a bunch of calls against it, will probably do more tomorrow. That’s my take on Amazon ( NASDAQ:AMZN ), hope it works for you, and I hope you’re doing well.
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