AMZN follow-up

A little follow-up on my AMZN purchase from this morning. I don't have much time to write in the morning before leaving for work.

This is a more risky entry than typical for a couple reasons, but has a couple other good reasons to jump on now that I gave more weight. Here's the day-end chart:






First the bad. There was a huge gap back in late July that just filled last week. The stock retreated after filling the gap. Filling a gap and then retreating further is not uncommon, and would not be a huge surprise.

Also, the long-term downtrend the stock has been in since December of last year has not yet been broken. Notice how the gap was filled towards the top of the downtrend channel. That's a double whammy keeping the stock from going higher.

And now the good. The gap was formed by a huge volume blowoff type day. The sellers entered the market in huge numbers and puked up their shares, tired to death of watching the thing tank. I didn't look, but it is very possible a news event pushed them over the edge. Either way, this is very often a bottoming event. Lots of new blood own the stock.

Second, we have a pretty well organized young uptrend following the blowoff bottom. The trend line has been tested four different times including yesterday, with no breach. It is a young trend, but it has every chance to carry the stock through the old downtrend line. If it does, there is no telling how far it could go. This is an 8%/month trend, so it doesn't have to go too far for it to be a very successful trade.

That brings me to my third reason to buy today. The risk/reward ratio is excellent. I was able to get an initial stop loss at under 4% - less than half the monthly growth. Not bad.

Anything could happen, but I like this setup.