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The case study serious has been using positive cases most of the time and I think it would be nice to have a nnegative case to complement the previous case studies.  In a bear market,thi sis useful to sense the risk ahead of a positive low risk setup.  Most of the time we wasi for consecutive whole red bars for more than 8-10 days and add to position when we see the first green bar and a minor positive price action.  In most cases when we trading in a bull market , it works beautifully many many times.  However, in a bear market, we need to be caution when a possible low risk setup become a trap!

 

Today, I am going to use Amazon.com for today's case study.  We saw there were many consecutive red bars since Jan 6 (more precisely Dec 30 was the day to start scaling out).  For all the Amazon.com friends, we wait and wait for a low risk setup again and finally on Jan 27, we saw the first whole green bar and a minor positive price action.  We were excited.  But when we check the weekly chart, Jan 22, and 29 still showing whole red bars (plus the overall trend level is quite high on top of the previous bar were black which signaled a top), this gives us cautions and warnings for this low risk setup.  The next day, on Jan 28, we saw a whole  green bar and positive price action, but the trend level rising too fast and too far, this is a double warning on top of the one from weekly trend chart.  Fine, we take a look on the next day which is Jan 29, no good at all, the trend level was rising too far and too fast again and the negative price action gave another warning.  Based on all these little warnings added together, we need to think about this is a real rally or just a bounce.  Of course, we need to consider the broad market as well which is no good at all.  Added up all these, we should leave.  No one can predict the future, but you can gather as much as information as you can to project the future.  In this case, there were too many negative factors to signal that we should neglect the trade.

 

Another point we should consider is if Amazon.com is so bearish, we could tell this may be the start of a broad market correction or even a bear market return.  If most of the top stocks are so bearish, we can imagine the rest of the stocks won't do any good as well.

 

 

Trend tutorial case study series daily trend chart for Amazon.com - AMZN

 

 

Trend tutorial case study series weekly trend chart for Amazon.com - AMZN