Shortlist Amazon (AMZN) and CME Group (CME) for Short Setups

AMZN and CME are showing similar setups to the S&P

By Serge Berger, InvestorPlace Chief Technical Analyst

Hi everyone, it’s Serge from The Steady Trader. Today I wanted to look at a couple of stocks that have quite similar patterns and to some extent work quite well in relation to the S&P 500 where it currently trades.

For a little perspective let me quickly show you a chart of the S&P 500, the daily chart here. If you note the S&P has essentially, with this week’s selloff thus far, failed to penetrate the market below the 1675-1676 lateral support line. So the S&P is still trading within its upper trading range and has not yet created a lower low.

For my definition, I like to see a lower low at the tops in order to confirm myself that there’s a trend change, and on bottom, on the opposite, I like to see a higher high so I can see that the trend is actually changing at least for some time. In absence of that, there’s actually very little to do on the short side, if you look at it from the broader perspective but I did find a couple of stocks that are very close, and one is actually already breaking to the downside and making marginal lower lows.

That stock is (AMZN). Note the big rally off the June lows, then a big post-earnings rally on the 26th of July. So far we have lateral support, somewhere near the $296.90 area, and that broke yesterday on the daily chart. So now we do have a lower low in place for AMZN; the stock looks very heavy and looks poised to go lower. The problem is that even though we have the confirmed low, the stock still managed to close right at the intraday lows of the 26th of July.

So to some extent we still have very thin support, and of course yesterday the stock closed well off its lows, so there is a bullish undertone to this entire lower low situation, but I will say that if the broader market manages to fail below the 1676-1675 on the S&P 500, looks pretty good to be going lower there.

CME Group (CME) is another one that looks interesting, the stock also trading off a little bit since early July, and what it’s doing right now is consolidating. We have a lower low in the broader picture but what we don’t have is a low versus the low from a few days ago, ie. last week. So the stock continues to be resilient, very much like the broader market. Tight trading here in a very tight trading range. You can see a couple days ago on Wednesday, the stock actually broke this trading range a little bit, but then rallied right back up to the upper end of the trading range. So this stock too — I would suspect that if the broader market can make a lower low–and that’s a big “if and when” —  then these are two stocks that should be able to break below, and CME would probably break below quite forcefully for at least a couple percent to the downside.

So I hope this makes sense. Have a great trading day, and take care.

Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.

Article printed from InvestorPlace Media,

©2018 InvestorPlace Media, LLC