AMZN Takes Out Major Support

Amazon.com, Inc. engages in the provision of online retail shopping services. It operates through the following business segments: North America, International, and Amazon Web Services (AWS). The North America segment includes retail sales of consumer products and subscriptions through North America-focused websites such as www.amazon.com and www.amazon.ca. The International segment offers retail sales of consumer products and subscriptions through internationally focused websites. The Amazon Web Services segment involves in the global sales of compute, storage, database, and AWS service offerings for start-ups, enterprises, government agencies, and academic institutions.

Take a look at the 4-year chart of Amazon (NASDAQ: AMZN) below with added notations…

Chart of AMZN provided by TradingView

AMZN had been trading above a major level of support at $2875 (blue) for the past two years. The stock ended up breaking below that support on Friday, which means lower prices should still be coming, overall. If AMZN were to rally back up to that $2975 breakdown level, it may now act as resistance. 

The Tale of the Tape: AMZN broke a key level of support at $2875. A trader could enter a short position on any rallies up to or near $2975 with a stop placed above the level. If the stock were to break back above the $2875 level, a long position might be entered 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!

Good luck!

Christian Tharp, CMT 

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