For traders of Amazon.com (AMZN), this morning opened with a sharp downside gap and a powerful Trend Day down continued the selling pressure.
From my prior update on January 16th, I noted the same multi-swing (lengthy) negative momentum divergence into the $400 per share target level.
Despite yesterday’s strong upside speculative bounce, today’s gap and breakdown impulse confirmed the dominant thesis – that divergences into resistance suggested a sell-off phase for the stock.
With today’s gap and Trend Day, the first or initial target has been achieved. Amazon (AMZN) closed the session into the 38.2% Fibonacci Retracement near $360 per share.
We’ll use this for our focal point for strategy planning. While a bounce/retracement up off this level would be expected, be prepared to continue playing for potential lower targets such as the 50% retracement into $343 (retesting the gap-low) or even the $330 per share level.
A glance at the Weekly Chart shows us another interesting factor to watch:
We can see the primary uptrend in price from 2012 to present (and actually even before then) and we’ll note the tendency for price – in an uptrend – to retest the rising 20 week EMA.
That’s the same outcome which occurred recently in the S&P 500 and Amazon is no exception to the “pullback in an uptrend” scenario.
For now, we’ll again focus our attention on the rising 20 EMA into $365 per share. Note that while price closed under the weekly EMA, it held support so far on the Daily Chart Fibonacci Grid.
We can look back from 2012 to present to see each time price traded briefly under the 20 EMA only to resume the uptrend in motion.
On two occasions, price traded down to the rising 50 day EMA and if history repeats with a sharper/steeper retracement, the 50 week EMA target intersects the $325/$328 Daily Chart 61.8% Fibonacci Level.
Continue monitoring price relative to these levels and the immediate “support or break” challenge into $360.
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