Amazon ($AMZN) is in jail. Don’t spend any time on a jail break. (March 07, 2019)


This is going to be a real quick video, frankly, there is really nothing to do in the market. If you are looking for trades, if you are insisting on trading here is my suggestion; use the 1-minute chart. The market is in a real dicey place and there is nothing that I see that is really in a nice buyable uptrend. For the most part stocks are kind of like Amazon ( NASDAQ: AMZN ). And so I just thought I would come back to the well here. This was one that Cramer featured on Mad Money on Tuesday. I had said at that time not to buy it until it breaks out above the 200-day moving average.

One of the common mistakes that so many traders is, they take action anticipating a future event. They buy a stock before it breaks out. They short a stock before it moves lower; that is what I call expecting the unexpected. You can’t predict that a stock is going to break out, you can manage risk and put on a trade acknowledging that there is risk in the trade because the stock is not really doing what you think it is going to do yet. But to do that as a matter of course, in other words, to always be buying stocks before they break out, I am telling you, that is a losing proposition; it is just a losing game.

If you beg to differ with me, fine, show me proof. Don’t tell me about one trade but show me proof about how you have a strategy that you buy stocks before they break out and then you make a whole bunch of money when they do break out, and you show me how that has actually produced a strong P&L for you. Again, I am not talking about one trade, I am talking about a trade tactic that essentially predicts the future and you are getting paid on it consistently. Show me that and you know what? Here is what I will do, I will hire you because I could use somebody like that, I can’t figure it out.

The point here is, on Amazon ( NASDAQ: AMZN ), you sit here and you wait. When the stock did this I had put on a SMALL short position but it was a little bit different than you might think. I didn’t short the shares, not just shorting the stock here; it is a range here. But what I did was, I wasn’t betting on the stock continuing to move down. What I was really doing was betting on the stock NOT really moving up because of the way the market is behaving. Because of the way, again, this thing is just kind of stuck in jail. I am really betting that the stock is not going to break out here.

So what I did, I put this on a couple of days ago and then this morning, even though the stock fell after I took the trade off, I went ahead and closed the position because I was up about 50 percent on my trade and that was all. I am not afraid of the market; that it might blast off on me, but I think it is important to always be looking at the other side of the trade. You have to always have to be looking at the other side of the trade, particularly when you are short. Because if you get caught in a short squeeze that is NOT a good situation and that can wipe out YEARS of gains very, very quickly. I have done that. I did that several years ago, it’s a lesson I learned; and it is a lesson that, hopefully, you learn once.

Anyway, Amazon ( NASDAQ: AMZN ) is one of those things where at least for me it is too late, too short and it is definitely too early to buy. I wouldn’t even look at this stock unless it breaks out to, we’ll call it, green sky, until it breaks out above this level. If it breaks out above this level then it is something to look at but I doubt it is going to do that until the market is also turning up. Whether this is going to follow the market up or whether it is going to lead the market up, we don’t know that. But we do have to look at Amazon ( NASDAQ: AMZN ) in the context of the entire market. It is one of the biggest companies in the NASDAQ 100 ( INDEXNASDAQ: NDX ). And so as Amazon ( NASDAQ: AMZN ) goes so will that index go.

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