Click on the chart to enlarge it.
The Nasdaq 100 was decidedly bearish at the Weekly and Daily level—the primary “top down” prerequisite used to support the idea of an options play in Amazon (a Nasdaq 100 component) in the first place. For brevity the weekly and daily charts are not presented here; the daily looks very similar to the S&P chart presented in the Anatomy of a Day Trade example.
Let's look briefly at the half-day chart (203 minutes) of the Nasdaq to see what it has to offer. Notice that it's generating a ZeroHit setup as of the close of the first bar of the day at 10:53 am MST on July 20th (point "A" in the first sub-graph). This Ocean setup continues into the close of the day (2nd bar) without producing an Ocean based entry signal.
As is often the case with these setups, prices are finding resistance at the Ocean NMA moving average (marked with a down arrow on prices).
Importantly, and an ominous omen, this ZeroHit setup is accompanied by a huge NMM ROC “slingshot” formation on the half-day chart on the 20th. I say huge because it is the highest NMM ROC reading in over 3 weeks, and yet has occurred without prices retracing even a third of the decline of the prior 3-week period.
This formation alone should help persuade even the most obsessive bull to be cautious, and is potentially food for the bear to feast upon!
Though not relevant to the trade analysis at hand, note that this entire decline throughout July had been identified by a previous NMC ZeroHit on the 2nd, and confirmed the following day, leading to a 60-point Nasdaq decline prior to this compound signal that we're analyzing! (See arrow in first sub-graph—left-hand edge of chart.)
Sometimes it's still hard to believe, even when you see it in living color!
(This is the end of Part 2. Go to Part 3.)
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