AMZN-Broken Stock Watch
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Amazon is one of the darlings from this recent bull market. In fact, Amazon was one of the first stocks to move out of the March 2009 bottom and led us out of the worst bear market since the great depression. Now that AMZN has doubled in price it has been dead money since November 2009. Dead money is one thing but owning a stock that now has the potential to drop 15-20% over the near term is another thing. Amazon looks like it may be on the verge of filling its November gap.
Normally a sideways consolidation pattern is followed by a continuation of its current trend but in light of our bearish market conditions the opposite may hold true. The immense downside pressure caused by global economic worries and deleveraging across the board may finally be ready to take down our big leaders. Amazon looks like it will be the next victim and AAPL may be next
Here is what to we are seeing and here is what to watch for going forward.
Amazon started its slide when it broke through its 50 day moving average line on heavy volume last month. This was followed by multiple higher volume down days and then a bounce back up to the 50 day MA again as it found some buyers. This turned out to be only a dead cat bounce as AMZN was next met with a wall of sellers at this new resistance area. Another sell off followed, pushing AMZN down to new short term lows at its 200 day MA. It is expected to get at least some sort of a bounce at such long term support levels such as the 200 day MA but this bounce only had enough power to take it up to its old breakout line. It then quickly turned tail and reversed putting in another lower low. Things seem to have gotten worse on Tuesday as the obvious place for buyers to show up would be its 200 day moving average line. As of 12 pm est. most of the buyers have disappeared and we are seeing the sellers taking control producing some heavy volume to the downside
What to look for next:
In order for AMZN to survive this sell off it needs to find some buyers at the old lows line marked on the chart. This too is the obvious level that buyers should show up at because it is not only the low end of the trading range, but this is also the old lows level going back to November 2009. Both of these places are where institutions and traders like to use as a point of reference to buy from. You therefore should have at least 2 types of buyers stepping up here. If they don’t you know this stock has no other option but to go to the next support level which is around $95. Do you want to hold on while your stock drops nearly 20% in a short period of time? If it breaks the $115 level it may be adios for AMZN, although there may be some minor support left until we hit the $110-$113 level. Any breach of that level would most likely lead to more aggressive selling and a broken stock.
AMZN may break these levels now or it may selloff and gives us a bounce into the 200 day MA where a wall of sellers will most likely be waiting. This would be your sell or shorting zone.
Disclosure: no positions