Why Amazon’s Stock Could Soar If This Key Pattern Breaks: A Technical Analysis

An Amazon delivery worker pulls a delivery cart full of packages during its annual Prime Day promotion in New York on June 21, 2021. (Brendan McDermid/Reuters)

Amazon.com Inc. was trading flat on Tuesday after attempting a bullish break immediately after the market opened. The stock has been struggling with heavy psychological and price history resistance at the $3,600 level on multiple occasions after filling a gap between $3,549.99 and $3,580.01 on Nov. 8.

The stock has been pressured by the general markets, which have been shaky due to the monthly expiry of the Volatility S&P 500 Index approaching on Wednesday and the monthly options expiration for November coming up on Friday, which will cause institutions to have to decide how to roll out their positions.

December often brings with it a “Santa Clause rally” in the stock markets, which is a typically bullish month. If Amazon can hold strong through the remainder of the week, it could be set to bust up through resistance and soar.

The Amazon Chart

On Monday, Amazon lost the strong uptrend it had been trading in since Oct. 29 when it failed to make a higher high above the Nov. 10 high of $3.605.45 and instead made a lower high at $3.593.88. On Tuesday, the stock fell to the $3.525.81 level, however, which paired with Monday’s low-of-day has created a bullish double bottom pattern on the daily chart.

Amazon is also trading in a bullish inside bar pattern, completely within Monday’s price range. The pattern leans bullish because Amazon has been trading mostly higher into the pattern. Both bulls and bears can watch for a break of the pattern on high volume to gauge whether the pattern is recognized.

On Tuesday, Amazon was trading on lower-than-average volume, which indicates consolidation. By mid-day, just about 843,885 shares had exchanged hands compared to the average 10-day volume of 3.21 million shares.

Amazon is trading above the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending above the 21-day, both of which are bullish indicators. The stock is also trading above the 50-day simple moving average, which indicates longer-term sentiment is bullish.

Bulls want to see big bullish volume come in and break Amazon up from the inside bar pattern and then for sustained momentum to push it up through the $3,600 level. The stock has resistance above the level near $3,658 and $3.696.

Bears want to see big bearish volume enter Amazon to drop it down through the inside bar pattern and through a support level at $3.552.25. If the stock falls below $3,447.05, it will create a lower low, which would negate put the stock into a confirmed downtrend.

(Benzinga)

By Melanie Schaffer

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