Technical Analysis and Market Entry: Amazon (AMZN)

  • Amazon (AMZN) shares are running at seven consecutive trading weeks in the green, up 20% over the period.
  • The online marketplace giant is due to report its quarterly earnings on April 25, where upside surprises are anticipated for their numbers.

Amazon shares have been storming ahead over the past few trading weeks, having reached their highest level since October 2018. The current rally north has been observed for seven consecutive weeks, the longest run of gains since April 2007. AMZN has managed to advance around 20% within the noted period, with the price on a stable bull trend.

2019 Bull Run

Since the beginning of the year, the price has gained over 40% and life has been firmly kicked back into the bulls following a painful end to 2018. In September 2018, AMZN hit a new all-time-high up at $2,055, before running into some significant sellers. The drop lower was not too surprising given the powerful consistent rise the stock had experienced; profit-taking was only right.

The dip seen from September to December 2018 resulted in a steep fall of some 35% from the noted high area, down to $1,307.90. Buyers piled in from the get-go this year, with the bulls setting their sights on new all-time-highs. The move to the upside picked up some pace following a breakout of a consolidation period. AMZN was moving within the confinements of a triangular structure formation from January to March.

Momentum drastically grew following the bullish breakout of the noted technical pattern as the stock saw an increase in buyer interest. The bulls were essentially freed from the cage of the pennant, playing out to the textbook in breaking higher and pushing further north. There is little in the way now with regards to resistance until a retest of the all-time-high territory.

Earnings Report – 25 April

On Thursday 25th April, after the closing bell, the online marketplace platform giant is due to report its quarterly earnings. Analysts are anticipating Amazon to report Q1 earnings of $4.72 per share on revenue of $59.65 billion, which would represent a 17% increase from last year. As a recap, in Q4 2018, the company reported a 63% increase in its earnings. The report was helped by higher overall sales during the holidays. For this period, results had far exceeded analysts’ expectations.

Risk of Double Top

AMZN weekly chart.

The current technical price structure is shaping up to be somewhat of a double top formation, which sees Amazon at risk near the all-time-high area. Failure to break down the $2,000-2,055 region could result in the price completing the double top. Eyes would then be on the neckline of the possible formation, which can be seen down from the $1,400-1.350 area. A retest of this support could then be somewhat catastrophic for the share price.

Trade Recommendation

Long opportunities from the current level are attractive but do not offer a good risk-reward ratio. As detailed, resistance is not seen until the all-time-high area, which the price looks set to achieve. However, in terms of major near-term support, this is observed back down at the $1,790-40 price range, where a demand zone is noted. A stop placed just below here at $1,720, with a target of $2,050 and an entry around current price $1,930, would be one possible setup. It would offer a minimal RR of 0.60, which is not appetizing by any means.

It may be ideal to wait and see how the price reacts at the all-time-high region for an entry. If the price sees a rejection here, the shorts will be eyed down to $1,750, $1,600, $,1400-$1,300 (neckline), with the further scope of $1,000. Entries would be ideal within the noted zones, with $2,000-2,055 for the described short targets. If, on the other hand, Amazon shares manage to push for a weekly closure above the noted supply zone, then long-term buys would be deemed attractive.

Featured image courtesy of Shutterstock.

Ken has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.