Managing Trades Example with Amazon

Recently, Amazon has made a series of higher lows, and looked at first glance to be setting up for another leg higher. However, taking a look at the previous low to high rally, we projected resistance right around 349.02. This also coincided with resistance projected from the prior high to low swing, as well as some shorter term minor swings. In combination, it was clear there was resistance right in the 349 area. With this area defined, Amazon was vulnerable to a decline if the price action could not clear resistance, and that is exactly what we saw. The timing also lined up, as the prior swings from low to high took 22 and 23 trading days, with this most recent swing topping out after 23 days. So in this particular case, we had a series of factors combine to provide reason to be concerned.