AMZN
These are the things I look for when drawing my levels. I don't use any indicators because I believe they can be misleading and cause an inadvertent bias. I look at a trade from multiple angles. Its not as simple as entering into a trade just because a stock broke a level. You have to align your trade with News events, Upgrades, Strength of sector, Strength of market etc..
1. Analyze price action
I look at how many times a stock fails at a certain resistance area.
i.. If AMZN fails at 3250 multiple times, that means that's a strong level. and when it finally does break, a big move can happen.
2. Stock Patterns
a) Pennant, Bull Flag/Bear Flag, H&S/Inverse H&S, Wedge, ascending/descending triangle
2. Correlation with SPX/SPY
a) Is AMZN moving up while SPX is moving down? This indicates that AMZN price action is strong. Is AMZN moving down with SPX moving up? This indicates that AMZN price action is weak.
b) You also have to look at what the stocks in the sector you are trading are doing. Say AMZN does break 3250 but the tech sector is weak that day, and SPX is weak, this can drag AMZN down.
3. News.
I check pre-market for news every morning. Did the stock get an upgrade/downgrade? Is there any news being anticipated?
If you are are patient and wait for breakouts at key levels, these types of trades can present a great risk/reward ratio. You don't need to trade everyday. You can make 25-30 trades a year and make 100k+ relatively easily while only risking a small amount of money. Don't be in a rush to trade everyday. Preserving capital and just waiting for the best setup is 80% of trading.
1. Analyze price action
I look at how many times a stock fails at a certain resistance area.
i.. If AMZN fails at 3250 multiple times, that means that's a strong level. and when it finally does break, a big move can happen.
2. Stock Patterns
a) Pennant, Bull Flag/Bear Flag, H&S/Inverse H&S, Wedge, ascending/descending triangle
2. Correlation with SPX/SPY
a) Is AMZN moving up while SPX is moving down? This indicates that AMZN price action is strong. Is AMZN moving down with SPX moving up? This indicates that AMZN price action is weak.
b) You also have to look at what the stocks in the sector you are trading are doing. Say AMZN does break 3250 but the tech sector is weak that day, and SPX is weak, this can drag AMZN down.
3. News.
I check pre-market for news every morning. Did the stock get an upgrade/downgrade? Is there any news being anticipated?
If you are are patient and wait for breakouts at key levels, these types of trades can present a great risk/reward ratio. You don't need to trade everyday. You can make 25-30 trades a year and make 100k+ relatively easily while only risking a small amount of money. Don't be in a rush to trade everyday. Preserving capital and just waiting for the best setup is 80% of trading.
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