Amazon Up Against Resistance

 | Apr 12, 2013 | 9:00 AM EDT  | Comments
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Stock quotes in this article:

amzn

In late March I produced a video for this site on a two-step pattern setup in Amazon.com (AMZN). 

The initial rally seen off this trade setup was $15.33, which was followed with a failure at key daily resistance that was also identified in the Columnist Conversatione section. As AMZN traded back towards the original setup zone, we saw new buy triggers that fired off earlier this week. 

Now, IF this two-step pattern is going to play out fully, the initial target for this trade setup comes in at $293.60. This is just the 1.272 extension of the two-step pattern low made on March 22. The 1.272 extension is always my first major target for these setups. The second is always the 1.618 extension of the swing into the setup zone. In this case, target 2 comes in at $304.90. But we don't always make the targets on these trade setups. For this reason, we want to trail up stops as it moves in your favor just in case we don't get to the targets.

 

Amazon.com (AMZN)
Source: Dynamic Trader

 

It is even more important to trail up stops if you are running into a rather important resistance decision where another failure could occur. We are facing such resistance right now. The first standout resistance decision comes in at the $271.13-$274.36 area. This zone includes multiple 100% projections of prior rally swings along with a .618 retracement and a 1.272 extension of the last prior swing down. Beyond this, there is also resistance at the $275.89-$277.92 area. These zones are illustrated on the daily chart. Just because we are up against this resistance does not mean you have to get out of the trade. But it is a good idea to protect profits.

There are some traders that might even use this zone for a short sale. How this work is used is up to the individual trader. For me, I am currently out of this stock, but I would just be protecting profits here. My bias is that we would eventually clear this resistance and head towards the bigger-picture target, but you can't trade a bias. You have to trade a setup and you have to follow your money management rules.

Let's see what AMZN does against this key decision in the coming sessions.

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