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  • irf944 irf944 Nov 17, 2009 5:07 PM Flag

    TA not working

    Technical analysis is not working with AMZN. This stock is clearly overbought, however we're not seeign the correction we should. Possibly the short sellers covering, the MM controling the stock, momentum and other factors are clearly in control. I bought $125 November puts and paid $2.25 for them when the stock was around $128 and I expected a couple point retreat that never happened. I think we will see a couple point correction but I'm not so sure when that will occur. I certainly can't use technicals to time it. There were also negative candlestick formations that gave me the confidence to buy the puts. Those candlestick formations also didn't pan out. Teh stock kept going up.

    I'm hoping for a 3% - 5% correction by Friday so I don't have to take a bath on my puts, however i'm not too hopeful anymore.

    Lesson learned - there's a lot more than technicals to look at. Momentum, short selling and of course the MM manipulation which is a hige variable.

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    • Most people do not know how to use TA.

      The concept of an oversold or overbought technical indicator is often misleading. The momentum indicators and oscillators are supposed to show the strength of the trend. However a strong trend reading does not imply that the trend is ending. The stock can continue its trend for a long time and remain overbought/oversold for a long time.

      If you are looking for a trend-reversal then wait for the indicator to move out from the overbought or oversold area. Many people use an RSI falling below 70 as indication to sell or RSI rising above 30 as an indication to buy. The RSI might have remained at 80-90 for a long time before it starts curling down and give the sell signal.

    • i would roll some of those puts to dec 125/120s, its worth decreasing leverage, its gonna be a nice ride , dont be left out after such a good trade because of oe bullshit

    • if i look at the right chart, last time AMZN was at 128 on 11/10 i.e. a week ago.

      that was the third day of a new uptrending channel

      one can clearly see a nice ascending triangle on intraday charts (i am looking at 15 min)

      also on that day AMZN made a higher high and did not get below the prior day low

      what kind of TA you did that did not work?

      TA aside, don't you think that buing front month options are highly speculative (i.e. gambling)? How about honoring your stop? where was it?

      • 2 Replies to konnikov
      • Excellent post with some good comments....thanks.

        At that point in time I saw the stock being way overbought on Stochastics and RSI. The MACD histogram was sloping downwards even though stock was making a new high which I thought was an indaction of thigns to come.

        I did not catch the ascending triangle on that day. i bought early in the day.

        Yes, buting November Puts was speculative and in hindsight a gamble. Instead of honoring a stop i was buying more puts as the price went up. I was chasing the stock which was a bad move.

        This is one trade I will learn from.

      • Good post

        I would add that TA is and inductive reasoning tool, not a deductive one. It increases the probability of being right but it does not signal a certainty. If trading were that easy...

        All candlesticks need confirmation
        For instance: doji on IWM today at the "end" of an uptrend needs confirmation.

    • Roll over to December, or better January.

    • I've said it 1,000 times. TA has no place in AMZN. Would TA have worked with Madoff's "portfolios"?

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