I noticed this early today, because I day-traded Amazon to the short side and did quite well. Here on the daily chart, check out how coiled up price has gotten...trading within a 7 point range for the last 17 trading days - damn near a month! As a result, the ADX has plummeted and is now reading 13.54 at today's close.
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So what does this all mean? Typically, an ADX reading below 15 means that price is consolidating in preparation for a larger move. The longer the consolidation period lasts, the more pronounced the move will be. What the ADX does not tell you, is in what direction the move will occur. Just looking at the chart on it's own, I would say the pattern is looking pretty bullish, but considering the bearish undertones of the overall market, I wouldn't commit to a long position yet. I should also note that there is nothing saying that this pattern can't continue for another 3 weeks...it certainly can....be patient. Below, Amazon shows us a perfect example back in March of exactly what I'm talking about. After 19 days of trading between 115 and 120, price explodes to 150 in the following 6 weeks. Also note where the ADX was just prior to the move.
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