Level Watching and Swing Trade Planning for Amazon AMZN

Jan 16, 2014: 3:00 PM CST

Amazon.com (AMZN) has been a relative strength leader in the market and investors have been rewarded with a stellar, accelerating upside price trajectory.

Swing traders have an opportunity to play either an “alternate pro-trend breakout” or a “logical counter-trend retracement” opportunity developing into the current $400 per share “round number” reference level similar to what I covered in the prior update Trading the Amazon AMZN Retracement to Start December.

Let’s take a moment to view a “triple time-frame” perspective for planning the next tradable swing depending on whether the immediate outcome is a breakout event soon that trumps logic and chart probabilities for at least a minor counter-retracement lower.

Here’s the Weekly Chart Structure and Trend:

Amazon Amazon.com AMZN Weekly Chart Technical Analysis Primary Trend Trade Strategy and Swing Trade Planning

The key factors that jump-off the chart at us include the primary uptrend (from 2009 to present), the salient (and stable) rising trendline channel as drawn, the reversal candles developing into the $400 “round number” reference level, the over-extension above the upper trendline in late 2013,  and the spike-up in momentum with the recent impulse.

Simple strategy planning would call for a possible retracement down against the $400 per share level toward the rising 20 week EMA ($363 currently) or even the rising upper trendline channel ($330) – both of these targets rise each week.

That’s the “pullback” thesis which would be invalidated – and thus call for stops – above the $400 per share level and higher.

Bulls would look to play breakout and pro-trend continuity strategies – despite divergences on the lower frame – on a clean breakthrough beyond $400 per share (deemed the “alternate breakout” thesis at the moment).

We can see these divergences as we step inside the Daily Chart Trend Structure:

AMZN Amazon Daily Chart Primary Trend Triple Swing Negative Momentum Divergence Technical Analysis

On the impulsive breakout and gap higher in late October, shares formed new volume and momentum highs which suggested additional upside price action was likely.

As the additional upside action occurred, price pushed to three new swing highs, each of which developed lower peaks (highs) in the Momentum Oscillator along with Volume.

The peaks scraped against the $400 per share “round number” reference level, and some bulls/buyers took this opportunity to take profits as they sold into resistance.

Aggressive bears/short-sellers similarly took this opportunity to put on new short-sale positions with the expectation that price will likely trade down away from $400 as opposed to breaking straight through it without a classic retracement phase.

That’s the “Bull/Bear” Battle forming for Amazon (AMZN – link for additional trend analysis) shares at the moment, and it forms the basis of short-term swing trading strategies relative to $400 per share as an inflection point.

Amazon is a pro-trend, short-squeeze, breakout buy should it trade up away from $400 per share and a logical, counter-trend retracement sell as it trades down away from $400 (particularly under $390).

While not predicting the future, let’s drop to the intraday chart for a clearer view with Fibonacci Targets:

Amazon AMZN Intraday Day Trading Chart Intraday Structure with Divergences and Fibonacci Retracement Grid

The 2-hour intraday chart highlights the strong uptrend impulse that developed above $300 per share (the prior main “round number” reference level) as shares traded through “open air” toward the current $400 target.

At the moment, aggressive short-sellers are establishing new positions in anticipation of an immediate retracement phase.

Conservative or risk-averse bears are likely waiting to jump in short on a trigger-break under the $390 short-term support shelf.

Ultra-conservative short-sellers may even want to wait for a trigger-breakdown entry on a break under the $380 level which is the rising 50 day EMA.

Either way, these same bears/sellers will likely place their buy-back to cover (stop-loss) orders at gradients above $400 depending on their risk tolerance.

Perversely, it will be these same stop-loss (buy-to-cover) orders that will help propel any upside breakout that may develop above $400, giving fuel to the uptrend and breakout traders that will trigger long (buy) at increasing levels above $400 per share.

Simple swing targets to the downside would include the Fibonacci Retracement Levels ($365, $350, or $340 for easy reference) along with the rising 20 week EMA intersecting the $365 level currently.

Continue studying price action (bull/bear interaction) with respect to logic favoring a retracement… against the potential outcome for yet another upside breakout and bullish impulse phase.

See my prior updates regarding Amazon (AMZN) analysis including:

Trading the Amazon AMZN Retracement to Start December” (very similar logic)

Amazon AMZN and the Ongoing Parabolic Arc

October Breakout in the Uptrend for Amazon AMZN” (good educational reference)

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Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning parameters as we watch a “hold and bounce” or “break and retrace” scenario play out in the near future.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

2 Comments

2 Responses to “Level Watching and Swing Trade Planning for Amazon AMZN”

  1. Updating Amazon AMZN Gap into Fibonacci Support | Afraid to Trade.com Blog Says:

    […] update our Amazon (AMZN) charts and note the current level to watch from our prior “Level Watching and Swing Trade Planning” […]

  2. Matt Watterson Updating Amazon AMZN Gap into Fibonacci Support Says:

    […] update our Amazon (AMZN) charts and note the current level to watch from our prior “Level Watching and Swing Trade Planning” […]