Amazon (AMZN) Chart Review
Amazon has been on an incredible bullish run over the last 6+ years for investors and traders that have held long term positions in Amazon. For the loyal shareholders they have been well rewarded as the stock has climbed by over 370% since the lows reached in March 2011. If you had held the stock over a longer period the returns would be even higher.
Back in April of last year it broke out of a consolidation period and accelerated its uptrend pace as the stock started to climb faster, as the stock continued to make new record highs reaching a closing high back on the 5th of October of $844.36.
Fast forward to the end of November 2016, and it appears that Amazon has broken its most recent uptrend (See chart below) with the current price sitting at $762.52.
Amazon's Uptrend Within An Uptrend
The good run for Amazon appears to be slowing down for now, as the current uptrend has ended on a monthly chart. With one more trading day left for the stock it appears unlikely to jump back within the uptrend. If the break of the uptrend occurs the most likely target over the medium term for Amazon is a move towards its previous uptrend which is highlighted within the chart.
The first level of support for the stock to reach is around the $676 level. Given the price is above $500 per share you have to give a little bit more flexibility with support and resistance levels as the levels are not as closely defined.
Consolidation Pattern Possible
Amazon may not necessarily fall considerably over the next few months, as its a very strong bullish stock relative to the S&P 500 market. Its quite possible that you could see the stock struggle to move higher with the likely outcome that it move sideways to slightly down as it heads for the previous uptrend forming a consolidation pattern.
Lastly the momentum has fallen sharply over the last few months making a lower low even though the stock is near all time highs, indicating there is divergence and the rally is running out of steam.
The break of the uptrend for weekly chart below is not as clearly defined. The stock had recently closed below the uptrend 4 weeks ago only to pop above the uptrend again, with a rally to coincide with the overall market move higher from the US election results.
With only 1 trading day completed into the week the stock has once again closed below its uptrend. As its a weekly chart it would be ideal to wait for a completed weekly candle at the close on Friday to confirm that Amazon has also closed below its uptrend on a weekly chart.
If the confirmation is complete for a reversal in trend, expect the stock to move towards its first support level around the $681 - 682 level. If support is respected and it holds that level you could see the stock once again attempt to reach its prior all time highs around the $842 - 843 resistance level.
I have circled the previous false attempt to close below its uptrend back in February this year, so make sure to be patient and seek confirmation.
Momentum is only marginally positive at 2.38 haven fallen from over 157 several weeks ago. This indicates that the strength of the trend has practically disappeared. Look for momentum to move to the negative soon to coincide with the stock moving towards support.
The trend is clearly over on the short term daily chart, where I have circled on the chart where it popped lower closing below the long term uptrend.
After breaking its previous support of $788 it proceeded to the $717 / 718 level of support, after retracing back to the new resistance level of $788 creating a change of polarity. Once it reached resistance it has proceeded to begin falling again confirming the new resistance level. This is a bearish signal as the bears are now in control on a short term basis.
The price is currently sitting below its 50 day moving average and the 10 day moving average has crossed below the 50 day moving average signalling a reverse in trend.
Normally based on the price action only I would say that the stock is moving next to its $717 / 718 support level again. However the momentum indicator is showing divergence having recently turned positive and accelerating higher. This indicates to me that we could see Amazon make a push higher to break above resistance of $788. If this was to occur it would also reverse it new daily chart downtrend.
Based on the conflicting indicator we would need to see more price action from Amazon to determine its likely direction in the short term.
By the end of the week we should have confirmation on all 3 charts the trend of Amazon moving forward.
Thanks for checking out my latest chart review.
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Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
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