Technical Analysis: Amazon Stock Breaks Out of Pattern and Prints Bullish Candlestick.
On Wednesday, Amazon emerged bullishly from a falling channel pattern.
Amazon’s session on Wednesday ended close to the day’s peak, so Thursday’s pricing could be higher.
After posting a bullish day on Wednesday, when the stock rose 1.39%, Amazon.com Inc.’s shares was trading flat in the premarket on Thursday.
Amazon was in a falling channel pattern where the stock was making lower lows and lower highs between two parallel trendlines. The surge higher helped Amazon to break out of this pattern.
The pattern is negative in the near term but has the potential to turn bullish later.
For bearish traders, the “trend is your friend” (until it’s not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
Bullish traders will want to watch for a breakup from the upper descending trendline, on high volume, for an entry. When a stock breaks up from a descending channel, it’s a powerful reversal signal and indicates a rally is likely in the cards.
The Amazon Chart: Amazon’s break up from the falling channel came on higher-than-average volume, which indicates that the pattern was recognized. On Wednesday, the Seattle-based company’s trading volume measured in at over 70 million shares, compared to the 10-day average of 58.73 million.
- On Wednesday, Amazon closed the trading session near its high-of-day price, which caused the strike to print a bullish engulfing candlestick. The candlestick indicates Amazon is likely to trade higher on Thursday.
- The next most likely scenario is that Amazon will print an inside bar pattern, which would lean bullish for continuation. If Amazon trades lower on Wednesday, the stock may find support at the upper descending trendline of the channel pattern.
- If Amazon falls back under the ascending trendline and into the falling channel pattern, the downtrend the stock had been trading in before breaking up from the pattern is likely to continue. If that happens, Wednesday’s bullish price action will serve as a bull trap.
- Amazon has resistance above at $99.88 and $109.30 and support below $95.49 and $92.18.