Amazon's stock has been historically the most bullish during the periods of Q3/Q4 in the past couple of years. However it isn't set in stone as past data shows and one which we can see during the current price action.
As we are currently in the midst of Q3 and Q4 just around the corner, it would be wise for the investors to keep an eye out on Amazon. Buying the stock into Q4 usually results in a late entry, with most of the bullish move happening towards the mid-end of Q3. In this article, we'll take a look at Amazon's stock price from a technical perspective.
The chart below represents Amazon on a quarterly basis. Notice how the steep uptrend has been in place since Q3, 2008 and has been well respected, considering that the upward trendline has been tested thrice.
The obvious question from this chart that comes to mind is should Amazon be a BUY or a SELL and what would be the price objectives respectively.
In order to answer the above question, we need to first mark a few milestones.
Remember that Amazon recently made a high earlier in July this year at $314.
If Amazon was going to be a SELL, in the 3 month chart, the current candle should ideally be closing as a reversal day. So far, what we have is a new high being made and price is currently trending downwards. In the event that Amazon's price closes lower than $246, all bets would be off on going Long on Amazon. This would be our first indication that probably the bull run is showing signs of exhaustion. On the same note, should the trendline hold the current rally, we would need to look for further confirmation before setting out a convincing BUY.
On the Monthly charts, we get a better perspective of price action. From a quick glance we notice that the most immediate price target would be in the region of $263 - $266. A break below this region could see a test of the main trendline with price regions of $234 - $240.
We also notice a region of resistance turned support around $269.25. This leads us to believe that in the event the price continues to fall, the support level is most likely going to be tested. A new monthly open below this price point could possibly ring the alarm bells for the bulls.
Switching to a weekly chart and plotting the Median Lines from the secondary trendline, we find some interesting price levels to watch.
Firstly, we see that price failed to reach the median line, which is an indication of a possible change in trend, but not necessarily a change in trend direction. By combining the information we get from the quarterly and monthly charts, we can now state that Amazon is currently undergoing a price correction. The weekly chart gives us the price points of $284.73 (which is where the current price rests at) and $245.79 being the next potential target.
As mentioned earlier, an open below the $266 region could well see the $240 - $245 levels being tested which would again require a break above $266 region in order to initiate long positions.
From the above analysis, we can thus conclude that the price region of $265 - $260 will be a key level to watch as the tide could turn either ways. It would be worthwhile to keep an eye out on the quarterly chart to see how the candle closes, which could give an early indication should the bullish trend in Amazon give hints of a possible change in trend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.