Why Amazon, AMD And Aterian Look Set For Continuation: Where Are The Stocks Headed?

Amazon.com, Inc. AMZN, Advanced Micro Devices, Inc. AMD and Aterian Inc ATER have developed inside bar patterns on the daily chart. An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."

A double or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

• Bullish traders will want to search for inside bar patterns on stocks that are in an uptrend. Some traders may take a position during the inside bar prior to the break while other aggressive traders will take a position after the break of the pattern.
• For bearish traders, finding an inside bar pattern on a stock that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.

The Amazon Chart: On Sept. 20, Amazon's stock tested the 200-day simple moving average as support and bounced. The stock is now trading in an uptrend and on Friday was consolidating Wednesday and Thursday's 2% move higher with an inside bar.

The AMD Chart: AMD broke up from a descending channel on Wednesday and ran over 3% higher over the course of the day and Thursday. On Friday, AMD's stock was consolidated the uptward trend with an inside bar.

The Aterian Chart: Aterian's stock has been volatile lately with huge volume. On Friday, the stock was consolidating Thursday's 16% drop with an inside bar. Aterian may be tightening into a pennant pattern on the daily chart.

Photo by Heidi Fin on Unsplash