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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 234.86

+0.4%

2:26 PM EST

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To: Sarmad Y. Hermiz who wrote (41575)	2/21/1999 6:33:00 PM
From: Rob S.	Read Replies (1) of 164684

The extremes that many of the Internet stocks have gone to 2-4 times in the past 12 months have exceeded the levels most stocks reach in their entire history. Amazon reached a similar extreme on July 7 and January 8. It saw extreme downside action on October 1. At those few points the TA pointed strongly for a reversal. Every other level reached saw many of the indicators pointing in one direction but not that level of agreement. I wish I had simply waited for these 3 points to be reached and then followed the TA obediently. When the zeniths are in the process of being reached it is often difficult for many people to see when it will change directions. The best strategy is not to try to go against the market hoping that the top or bottom has been reached. But when the "TA screams over-bought/over-sold" then you look for a key reversal pattern. When those extremes are reached, investors are nervous - you can "feel it" - and see it in the TA. Then a volume reversal or gap failure after a blow-off of buying or selling will signal the reversal. The high degree of emotion that these stocks trade with works to chart watchers benefit. A useful strategy is to watch a portfolio of stocks for the pattern to occur. Many TA analysts scan the universe of thousands of stocks for particular chart patterns depending on their thinking of the general market. For instance, if they think the market or certain sectors are over-extended, then they might scan for a bollinger band reversal, high P/E stocks, or "Brotnoy's OverPriced Stochastic" or a combination of formulas. Then you filter out the list of stocks by a study of the charts (the brain is still the best computer). SI has threads that deal with several TA software packages. They discuss the various programs and formulas extensively and free scan scripts are available. Some of the guys on the QP and other threads are first class technicians - they develop complex trading formulas and share them willingly. However you find stocks that have reached the edge of the cliff, then you watch the daily stock action for signs of a reversal. When the price action starts to get real frothy, then you watch the stock very closely - "read the ticker tape" to observe the emotions and movement in the stock. When the reversal occurs it is often quite obvious, as was the case for Amazon on January 8th. That is the point that the odds are extremely in your favor and the risk of losing money, if you stay on top of the trend, is minimal. The TA can, of course, be used to find under-valued stocks that are ready to break to the upside.

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