Chart Of The Day: Navigating Amazon's Conflicting Trends
Pinchas Cohen | Sep 15, 2022 19:34
I have been bearish on Amazon (NASDAQ:AMZN) since March despite its solid fundamentals because of the technicals.
I repeated that call in July, and then on August 1 I braved a short-term bullish call, despite being bearish on markets. The price bounced, reaching my trading sample's target and 77.2% of the implied short-term bottom's $150 target.
On August 18, I resumed my bearish call. The price has dropped 8.9% since. Where to from here?
h2 Fundamentals/h2Amazon sellers are braced for a downsize.
h2 Technicals/h2Let's examine the different term trends.
The price is uptrending, so bullish, but before you rush to buy Amazon shares, let's take a step back and look at the large picture.
In the weekly chart, we realize that the larger trend is falling, as the price completed an H&S top. The price closed below the 200-week moving average (WMA) and the 50 WMA, crossing below the falling (more bearish) 100 WMA. Moreover, despite the 44.5% rebound, these MAs keep pointing down. So, bearish, but before you rush to short Amazon, let's take another step back for an even larger picture.
Only now, with a bird's-eye view of the monthly chart, can we appreciate the trend complexity and how different terms interact with each other. Note how the price has respected the long-term uptrend line since January 2015, demonstrating that buyers controlled the macro trend.
So, bullish? OK, before you rush to do anything, you need to determine what kind of trader you are. Only then can you make an educated bet.
h2 Trading Strategies/h2Conservative traders should wait for the different term trends to synchronize, buying only if the long-term uptrend since the 2015 bottom breaks the medium-term downtrend.
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Moderate traders would wait for the rising short-term trend since June's bottom to realign with the falling medium-term trend, to short.
Aggressive traders could buy the short-term trend, taking advantage of the positive risk-reward ratio between the short-term rising channel support and the medium-term falling channel's resistance.
Here is an aggressive long trading sample because it is timely while more cautious traders wait for confirmations.
- Entry: $127
- Stop-Loss: $122
- Risk: $5
- Target: $142
- Reward: $15
- Risk-Reward Ratio: 1:3
Note: I am not in the fortune-telling business. I am an analyst. This article is my interpretation, based on the principles of technical analysis. Like any other discipline, the study is statistically based. The follow-through is what happens most of the time. There is no way of knowing whether it will happen this time. Therefore, have a coherent plan that addresses your timing, budget, and temperament. If you don't know how to do that, I provided you with a generic sample above for practice. Close your eyes and imagine you lost your trade. If you can't handle that possibility, don't trade.
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