Think of security prices as a war. It is a battle between a bull (the
buyer) and a bear (the seller). The bulls push prices higher and the bears
push prices lower. A buyer that feels an area has good value will buy at
that level. The seller that feels that a stock has reached fair value will
sell at that higher fair value price. The direction prices actually move
reveals who are winning the battle.
Remember when a trade takes place, a buyer and seller agreed to a price.
There was a buyer and a seller involved in the transaction. The buyer feels
the stock will go up. The seller wants to move on to another stock that he
may feel will appreciate faster.
Support levels are the price where the majority of traders feel the value
is a good buy.
Resistance is the level in which the majority of traders feel prices will
move lower.
When the majority of traders and investors change their expectations, these
support and resistance areas get violated and a new trend may be beginning.
This can occur due to changes in expectation of earnings, new product
development, change of personnel, cut backs or expansions.
Can we figure out how well the Internet commerce stocks did this Christmas
season?
Is it in the charts? I think so.
Let’s look at the Amazon.com, AMZN.
The chart started looking bad during the second week of December. After a
rise in anticipation of a good sales weekend on December 6, many Internet
commerce stocks rose sharply.
By the middle of the December, many stocks including AMZN broke support
levels and moved lower.
AMZN found new support in the low 90’s, but after a few sessions broke that
support too.
As Christmas approached, AMZN was interesting, but after Christmas, AMZN
broke down again.
The attempted bounce today looks weak and it looks like another break is ahead.
I would Short AMZN here in anticipation of another break.
A stop can be placed today’s high at 87 �.
