(1) Yesterday’s daily candle in AMZN looked like a bearish reversal candle and many traders will have established a short position prior to the close. I view that candle as a potential bearish reversal and I won’t initiate a short unless price drops below yesterday’s low. If you look at enough charts you’ll see numerous times where that type of a candle did mark a pivot high but you’ll also see a relatively large number of occasions where price did not reverse and continued higher. Waiting for confirmation on this setup is preferred. The stop on on a short trade is the high of the reversal candle. If a short trade is taken early today on a hunch that yesterday’s candle high will turn out to be a pivot high then it’s imperative to manage risk by using yesterday’s high as a hard stop!
Below is a closer look at the important levels on the hourly chart.
