**THIS IS PURELY MY OPINION AND I AM NOT LIABLE FOR YOUR TRADING DECISIONS**
I've been getting a lot of questions about my trading strategy. I think this AMZN chart is a good example for me to explain. I trade on the theory that price moves from supply to supply or demand to demand, which is a fundamental approach to trading that I definitely did not create.
You can see that AMZN has been trading between the bounds of this wedge (white trendlines) since September 2020. The yellow horizontal line at 3367 is a major supply level.
- "Supply" means a level where a lot of investors sell their holdings and take profit as its reached their price target, which results in a price rejection and drop in stock price. You can see that the market was in consensus about the 3365 price target for AMZN, as it was rejected at this level 5 or 6 times since September (yellow circles). It managed to breakthrough twice, made new supply levels at 3400, 3450, 3500 and 3550, but quickly retraced back into the range each time.
- Supply is created when emotional buyers buy from smart sellers. This is why in my strategy, I only buy a stock when price breaks a major supply level (or short a stock when it breaks a major demand level). When this happens, it means the market is in consensus that this asset is actually worth more than this level, and all of the investors that were previously sellers at this level either hold or buy more, and price tends to explode through the level. This is why I like to trade stocks when they cross major supply levels.
The next level of supply is the first horizontal green line at around 3400. Since price moves from supply to supply and demand to demand, this is technically the next price target, followed by 3450, 3500 and 3550. My trading style is more conservative so I would definitely take partial profit on the way up.
Just a note that AMZN has earnings tomorrow after market close. I personally never hold a stock/option through earnings because it's so unpredictable. If I take this trade tomorrow, it will most definitely be a day trade
Trading demand to demand is the exact same thing - just flipped! Demand is a level where buyers step in and drive price higher. I enter puts when a major demand level is broken, and my price target is the next level of demand.
Hope this helps! Feel free to comment with any questions or opinions.
I've been getting a lot of questions about my trading strategy. I think this AMZN chart is a good example for me to explain. I trade on the theory that price moves from supply to supply or demand to demand, which is a fundamental approach to trading that I definitely did not create.
You can see that AMZN has been trading between the bounds of this wedge (white trendlines) since September 2020. The yellow horizontal line at 3367 is a major supply level.
- "Supply" means a level where a lot of investors sell their holdings and take profit as its reached their price target, which results in a price rejection and drop in stock price. You can see that the market was in consensus about the 3365 price target for AMZN, as it was rejected at this level 5 or 6 times since September (yellow circles). It managed to breakthrough twice, made new supply levels at 3400, 3450, 3500 and 3550, but quickly retraced back into the range each time.
- Supply is created when emotional buyers buy from smart sellers. This is why in my strategy, I only buy a stock when price breaks a major supply level (or short a stock when it breaks a major demand level). When this happens, it means the market is in consensus that this asset is actually worth more than this level, and all of the investors that were previously sellers at this level either hold or buy more, and price tends to explode through the level. This is why I like to trade stocks when they cross major supply levels.
The next level of supply is the first horizontal green line at around 3400. Since price moves from supply to supply and demand to demand, this is technically the next price target, followed by 3450, 3500 and 3550. My trading style is more conservative so I would definitely take partial profit on the way up.
Just a note that AMZN has earnings tomorrow after market close. I personally never hold a stock/option through earnings because it's so unpredictable. If I take this trade tomorrow, it will most definitely be a day trade
Trading demand to demand is the exact same thing - just flipped! Demand is a level where buyers step in and drive price higher. I enter puts when a major demand level is broken, and my price target is the next level of demand.
Hope this helps! Feel free to comment with any questions or opinions.