Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally. It operates through the North America, International, and Amazon Web Services (AWS) segments. The company sells merchandise and content purchased for resale from vendors, as well as those offered by third-party sellers through retail Websites, such as amazon.com, amazon.ca, amazon.com.mx, amazon.com.au, amazon.com.br, amazon.cn, amazon.fr, amazon.de, amazon.in, amazon.it, amazon.co.jp, amazon.nl, amazon.es, and amazon.co.uk. It also manufactures and sells electronic devices, including kindle e-readers, fire tablets, fire TVs, and echo; and provides Kindle Direct Publishing, an online service that allows independent authors and publishers to make their books available in the Kindle Store.
Take a look at the 1-year chart of Amazon (NASDAQ: AMZN) below with my added notations:
Over the past 3 months, AMZN has created a key level of support (green) at $950, which is also the “neckline” for the stock’s potential head and shoulders (H&S) reversal pattern. Above the neckline you will notice the H&S pattern itself (red). Confirmation of the H&S would occur if AMZN were to break the support, and lower prices would be expected from there.
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The Tale of the Tape: AMZN has formed a head & shoulders pattern. A long trade could be made at the trendline with a stop placed below that line, but ideally, the pattern implies a short trade to be entered on a break below that level instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach