A Chart Look at Amazon AMZN at the 160 Level

Oct 4, 2010: 10:27 AM CST

Investors in Amazon.com (AMZN) have been treated to a multi-month rally, but we need to watch the $160 level as overhead resistance, look to short-term support, and note the key price levels that will be important in determining the next likely move for the stock.

Let’s start first with the Monthly ‘structure’ view:

Without going too deep in the charting, I wanted to highlight the $160 level as being upper Bollinger Band resistance, a tiny ‘upper shadow’ on last month’s power-candle, and a slight rising trendline connecting the two prior price peaks to the current peak.

I also wanted to highlight the key support that occurred on the rising 20 month EMA in mid-2010 as a great lesson in how long term moving averages can be helpful for entering short-term positions.  That’s a classic “ABC” pullback there.

Anyway, now let’s drop down to the daily chart and see what short-term levels are important to watch:

September was an amazingly bullish month for Amazon.com, rallying from the $125 level all the way to peak at $160.

Whether or not $160 remains as an intermediate term peak, or just a shorter-term ‘blip’ in the bullish road depends in part on what happens during this recent pullback in price.

For example, we want to watch the $150 level, which is the confluence support of the rising 20 day EMA ($149.80) and the prior 2010 price high from April ($151) – both of which round down to the $150 ‘easy to remember’ level.

So if price continues its pullback decline to test $150, supports there and rallies higher, we may expect a further price break to new highs above $160.

A failure for price to hold support at $150 paints an entirely different chart picture, which would suggest at least a test of the rising 50 day EMA at $140.  And what happens at $140 would determine if we expect to fall further to the rising 200 SMA at $130.

These are all easy to remember reference levels that traders and investors should note as the stock continues to tread its way into the future.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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