It has been a volatile couple of months for Amazon (AMZN) shares. Still the price swings have all occurred under a declining trend line. And while Amazon has seen a substantial bounce off its November low and Wednesday’s Powell rally was impressive, the downtrend is still in place. What would it take to change that?
Here’s what we see on the Amazon daily chart.
The October high formed a double top along with the September high. During the first week of October, shares broke through their 50 day moving average, and they began a process of making lower highs and lower lows.
The overall high/low ranges expanded and in less than a month Amazon shares dropped 30% from their October intraday high to their November intraday low.
After making a new lower low last week the stock bounced hard and with the 6% rally on Wednesday, it is up 18% off the November low. Coincidentally, today’s close represents an 18% decline from its October high.
Price momentum and money flow is positive. Note the bullish divergence in the moving average convergence/divergence oscillator. Momentum and upside volume will be required to penetrate the zone of resistance just overhead.
The declining 50 day moving average at $1748 marks the top end of the zone, which includes the 200 day moving average at $1695 and the 50% Fibonacci retracement level (not shown) at $1725. A downtrend line drawn off key October/November highs, which is now acting as support, marks the bottom of the zone.
For the intermediate term downtrend to be officially over, Amazon must make new higher highs and higher lows. The first step is to break through the zone of resistance and close above the $1784 November high.
All that would require is another 6% pop like we saw today.