Last up is
(AMZN - Get Report)
, a stock that's forming the same setup as the one in Travelers. AMZN is making an ascending triangle pattern right now, with resistance at $238 and uptrending support coming in below shares. Amazon's pattern doesn't look exactly like TRV's -- it started out with a gap higher, and the first swing high in the pattern fell just short of our $238 resistance level -- but that's a good example of why
are sort of the lowest common denominator in technical trades.
You probably realize that patterns don't work because of some magical geometric force in the market. Instead, they work because they're simple ways to describe the supply and demand forces at work in a given stock; supply and demand, after all, are the only two forces that impact a stock's price.
>>7 Most Reliable Growth Stocks in the Market
So, in real-world terms, the resistance level at the top of AMZN's pattern indicates that there's a glut of supply of shares of AMZN above $238. Maybe it's a price where investors start to think that the stock is getting expensive, and it makes sense to take gains. The critical factor is that a breakout above $238 means that buyers have absorbed that excess supply of shares and removed the biggest upside barrier for prices.
When an upside barrier (like a pile of sellers) gets removed, traders are left with a high-probability time to buy. For Amazon, I'd recommend keeping a protective stop just under the
50-day moving average
To see this week's trades in action, check out the
Technical Setups for the Week portfolio
-- Written by Jonas Elmerraji in Baltimore.
Follow Stockpickr on
and become a fan on