Amazon.com, Inc. (NASDAQ:AMZN) Primed for a Bounce Trade
Shares of online retailing giant Amazon(NASDAQ: AMZN ) haven’t been immune to the recent stock market volatility. In fact, AMZN stock fell about 14% in recent weeks. However, in the immediate term, the stock looks increasingly oversold and it’s a bounce candidate that active traders should consider closely.
Before we dive into what makes an Amazon stock trade so appealing today, allow me to once again state the importance of understanding the high correlation embedded within the equity market. Unlike commodities or currencies, stocks as an asset class are very highly correlated. This positive correlation gets even more pronounced when volatility increases, as it has over the past week or so.
In times such as these I prefer to stay with indices or broader exchange-traded funds or index futures as opposed to trying to be a hero by outsmarting the market with a single-name stock. However, there are a few exceptions to my approach. This is particularly true when it comes to mega-cap stocks that, for the lack of better term, are the market.
And you guessed it – AMZN fits that bill perfectly.
Also consider that I think the broader stock market and most risk assets will likely go lower in the coming weeks and months, which makes today’s trade idea in AMZN a “counter-trend trade.”
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
The projected upper bound is: 1,911.63.
The projected lower bound is: 1,754.70.
The projected closing price is: 1,833.16.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 42.2095. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.53. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 1 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -61. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 14 period(s) ago.
Rex Takasugi – TD Profile
AMAZON COM closed up 39.490 at 1,832.890. Volume was 5% below average (neutral) and Bollinger Bands were 78% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,847.86 1,895.02 1,750.40
Volatility: 29 27 44
Volume: 4,582,808 3,694,585 5,227,384
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
AMAZON COM is currently 4.7% above its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of AMZN.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on AMZN.O and have had this outlook for the last 7 periods.
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