Amazon, Activision Blizzard And Nio Stocks Consolidate In This Pattern: How To Play The Break

Activision Blizzard, Inc ATVI, Amazon.com, Inc. AMZN and Nio Inc - ADR NIO 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 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 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 Activision Blizzard Chart: On Dec. 14, Activation Blizzard broke up bullishly from a bull flag pattern on the daily chart and shot up almost 7% to reach a Dec. 17 high of $62.07. On Monday, Activision Blizzard was printing an inside bar pattern in consolidation. The inside bar learns bullish because the stock was trading in a consistent uptrend before forming the pattern.

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The Amazon Chart: Amazon fell into a downtrend on Nov. 19 after forming a bearish double top pattern near the July 13 all-time high of $3,773.08. On Monday, Amazon’s trading range was narrow as it was printing an inside bar pattern, near the bottom of Friday’s mother bar. Amazon’s inside bar pattern leans bearish, but it is a good sign for the bulls if the stock can hold above a support level at $3,326.

The Nio Chart: Like Amazon, Nio was printing an inside bar pattern on Monday near the lower end of Friday’s candlestick, which also leans bearish because the stock is currently trading in a downtrend. If Nio’s inside bar pattern breaks bearishly the stock could retest a support level at $27.39, and below the area, there is a gap left behind from Oct. 14, 2020, between $21.97 and $23.73 that could be filled if the bulls don’t step in soon.