Amazon Stock: Don't Be the First One Back in the Water
Here's why the damage may not be over.
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Shares of Amazon.com AMZN are down sharply Friday. A lot of damage has been done on the charts but there could be more to come.
Let's check the "reviews."
In the daily bar chart of AMZN, below, I can see that the shares opened Friday with a big gap to the downside. Traders dealing in some overvalued tech names may be used to big gaps but look at the chart again — prices gap below the 200-day moving average line. This is not normal behavior. You should be sitting on the end of your chair.
The slope of the 50-day moving average line is negative. The trading volume is heavy as traders may be forced to sell leveraged positions.
The On-Balance-Volume (OBV) line was already in a decline. The Moving Average Convergence Divergence (MACD) oscillator is in a bearish alignment below the zero line.
In the weekly Japanese candlestick chart of AMZN, below, I have to use my imagination as this chart will not update until the end of the week. Prices are trading below the rising 40-week moving average line.
The weekly OBV line has started to turn lower. The MACD oscillator crossed to the downside in early April and pointed down towards the zero line.
In this daily Point and Figure chart of AMZN, below, I can see Friday's decline with the gap or price void filled in. A downside price target in the $133 area is being projected.
In this weekly Point and Figure chart of AMZN, below, I can see a downside price target in the $123 area.
Bottom-line strategy: Is Amazon a great company? That is what many people say. The company is not the issue. The issue is the stock. The stock is under intense selling pressure and this is not a buy-the-dip opportunity. Avoid the long side while AMZN is delivering losses.
Keep your powder dry and don't be the "first one in the water."
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