Amazon (AMZN) has been one of the markets leaders, helping propel the market higher over the last few years. As such, it is worth paying close attention to AMZN and other leaders for signs of a change in the bullish trend. For more on this please read our article – Are The Market Generals Leading Us To War?
Brett Freeze, author of Cartography Corner and principal of Global Technical Analysis has brought three aspects to our attention in regards to AMZN that are worth being cognizant of. These three are all based on analysis done using monthly prices. He notes:
- The sell pivot for active traders would have been isolated as 1993.29. This means traders should be short AMZN or have sold prior longs in the stock below that price. If AMZN were to drop below 1953.98, there are significant gaps below which could lead to a more precipitous decline.
- Granted, there have only been two sessions into October, but it is worth pointing out that Monthly Trend for November is developing at approximately 1967. AMZN has been Trend Up for 12 months and a monthly close below monthly trend would break this long term bullish trend. October’s monthly trend is 1896.48 and as mentioned November is currently 1967.00.
- The September candle (circled- upper-right graph) is what Candlestick technicians refer to as the (bearish) Hanging Man. The characteristics are a small real body, with little or no upper shadow, closing near the top of the session’s range, and very long lower shadow. In principle, the lower shadow should be 2 or 3 times the height of the real body. This pattern signals the market is vulnerable. The topping pattern is confirmed if the next session (October) is bearish.
The first diagram below shows the quarterly, monthly, weekly and daily patterns for AMZN. As labeled the weekly and daily charts are now in consolidation trends. If AMZN were to close below monthly trend in October or November, the monthly time period would join the daily and weekly in a state of consolidation and importantly further confirm the bullish trend has halted, at least for the time being.
The second graph below shows AMZN on a daily year to date basis. Note the circle which approximates 1953.98, as discussed in point 1, lines up well with the blue support trend line.
Given that AMZN has been one of the leaders of the market this year, it is worth paying attention to the potential signal it may be sending.
Michael Lebowitz, CFA is an Investment Analyst and Portfolio Manager for RIA Advisors. specializing in macroeconomic research, valuations, asset allocation, and risk management. RIA Contributing Editor and Research Director. CFA is an Investment Analyst and Portfolio Manager; Co-founder of 720 Global Research.