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Dueling Technicals on Amazon AMZN

Companies / Amazon Aug 30, 2017 - 02:30 PM GMT

By: Mike_Paulenoff

Companies

An analysis of Amazon (AMZN)'s charts on Monday identified a near-term potentially bullish formation juxtaposed against a tricky, potentially dangerous intermediate-term set up.

From a near-term perspective, AMZN on its hourly chart appeared to be putting in a "falling wedge"-type pattern (the opposite of a rising wedge), which usually represents a trend-ending formation. In this case, it would be the conclusion of the correction off of the July 27 high at 1083.20 to Monday's low at 942.25.


Often times, the end of the falling wedge will come in the form of one final down-spike beneath the lower wedge boundary line, into marginal new reaction low territory, say beneath 940, into the 936 area, followed by a vicious upside reversal spike and the initiation of a powerful rally that will propel AMZN above 953-960 resistance to confirm the turn. From a near-term perspective then, AMZN should be getting ready for a tradable upmove.

However, this particular decline from 1083.20 to 942 has placed AMZN in a precarious technical position from a weekly or intermediate-term timeframe. The weekly chart shows that the downmove from the all-time high at 1083.20 has positioned AMZN right at its major up trendline from the December 9, 2015 low at 474.00, which cuts across the price axis in the vicinity of 940.

This set-up presents us with a much trickier situation regarding the resolution of the nearer-term falling wedge pattern. Even if AMZN breaks 942 and spikes down from the falling wedge in what would represent a classic false breakdown followed by a sharp upside reversal based on the hourly chart set-up, the negativity of the weekly set-up might overpower that. Especially if AMZN breaks a major trendline at 940 amid bearish weekly momentum gauges, it could be vulnerable to considerably more weakness that points initially to 900-880.

Tuesday's trading helped provide a clue which direction AMZN will take. The stock intraday attempted to execute an upside reversal from a classic false down-spike from a falling wedge formation. Although AMZN is not out of the woods just yet, and must claw its way above heavy, consequential resistance from 950 to 960, Tuesday morning's sharp upside reversal from a new, spike low at 931.30 to an intraday high at 949.88 (at the time of this writing) exhibits very constructive form, indicating strongly that AMZN has established a significant corrective low off of its July all-time high at 1083.20.

See charts illustrating the dueling technicals on AMZN.

Mike Paulenoff is a veteran technical strategist and financial author, and host of MPTrader.com, a live trading room of his market analysis and stock trading alerts.
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