The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at
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Saturday, May 28, 2011

Where are we...

....and what is price trying to do?
How did the week end for AMZN?  A slightly lower low doji where price tested/bounced at the 50% retracement.   We're testing the consolidation alley (between 38.2% & 61.8% Fibs) but a first test of $186 below (provided $190 is broken) could give a good bounce, while overhead gaps above could be in play if sentiment runs bullish.

It's important to keep perspective in this game.  For short-term holding periods we only really need the past few weeks of price information above and below current price to help keep the current flow in perspective.  For day trading purposes we may keep an intraday chart with an overlay of the weekly bars to gives us a sort of spatial feel for the broader picture, for instance, take a look at AMZN over the past month:
  The above chart shows 60-min bars with outlines of the weekly candle.  From here we want to get an idea of where price broke out to give us an idea of potential support/resistance.

Next we may take each weekly bar and apply fibonacci levels to them to not only get potential S/R levels, but also give us an idea of what portion of the previous week we're trading in.  So, to start with the left side of the previous chart and going forward it may look like this:
 With the above chart we had a previous momentum week, while the following week (05/02) price was supported at not only a breakout point but at the top extreme of the previous week.  Essentially consolidation following a momentum move.

Going forward; The next week, price opened right at the previous week's 38.2% retracement and made a follow-through move that later in the week reached a 50% projection from the prior week's momentum candle:

Moving on...
The week of 05/09 saw selling into the close on Friday (seed wave outlined).  I kept two Fib. lines on the chart below;
1) Low of previous week (05/02) to high of the following week (05/09)
2) Low to High of week 05/09
Price opened the week of 05/16 under both 50% fib levels and sold off the entire length of the previous week within half the day.

So, we had a sell-off, price reversed just shy of our original support from the breakout point (teal box) on a seed wave (outlined in black) and retraced 50% of previous momentum.  Price then opened the week (05/23) under the seed wave's breakout point and under the previous week's 50% level:

From here:
  Currently weekly price is a doji candle (indecision/sideways price behavior) within the 50% range of the previous 4-weeks and within the previous week.

I'll update this tomorrow to see how we closed the week and how the support/resistance levels acted.

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