Stalking Amazon for a Buy

 | Nov 08, 2013 | 9:00 AM EST  | Comments
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For the last couple of weeks I refused to do my analysis on Amazon (AMZN). The reason why was because this stock was overextended after a beautiful run from a prior Fibonacci price cluster setup that was evident at the 10/9 low.

We saw a run of over $70 since that low was made. At that point, I did not want to try to pick a top for a counter-trend trade, but I also did not want to be a buyer at those higher levels since I knew this name was vulnerable to a corrective decline after that huge rally into three upside targets! We are finally are seeing a healthy symmetrical pullback in this name, so it's time for me to once again start crunching those numbers so we can stalk an entry on the buy side.

In this process I'm mostly comparing the prior corrective declines, and also some of the swings within the larger declines and projecting them from the most recent high made in AMZN. I do this, because as we have found in the past, many swings in the same direction will be similar to prior swings. Then I try to overlap these projections with other Fibonacci price relationships.

Now I call this "stalking" an entry, because I have not yet seen anything that tells me I should step in front of the current decline in this one. I have identified three different clusters of price relationships that include these symmetry projections, and have no idea which if any of these zones will hold. They come in at $338.35 to $341.98, $329.43 to $334.38 and $322.47 to 323.97. This was similar to what we saw before the 10/9 low was made.

In this stalking mode I want to see if price holds above one of the three price cluster zones. If it does, I want to see this followed up with a 30-minute price trigger that suggests that it is worth placing a bet against one of these zones. Note that the current decline into Thursday's low is very similar to the last decline made into the 10/9 low before it rallied $70+ bucks. That is what currently has me interested.

Besides the price support we are starting to test, I'm also seeing some timing cycles represented by the histogram below the chart that are also suggesting a possible low.  So let's watch for our buy triggers in AMZN and if you don't see one -- stand aside and wait for the next setup instead!

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