Stalking Amazon

 | Oct 12, 2012 | 10:30 AM EDT
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Amazon (AMZN) has been experiencing a healthy downside correction recently. Is this a buying opportunity, or the beginning of a more important decline? Anyone who tells you that they know that answer is essentially lying to you. I can provide you with some key price decisions, however, that may help you get back in on the buy side of AMZN when it looks like a safe, educated bet.

Let's start with the weekly chart. There are two standout price support zones that I am now stalking for a possible buy entry in this stock. The first one comes in at $235.24-$239.78. The second zone comes in at $228.43-$232.28. The most important price relationships within these Fibonacci price clusters are the 100% price projections or measured moves of prior declines since late 2011, along with a couple of .618 retracements of prior swings. We are currently right on top of this rather important price decision. Now let's move on to the daily chart.

Amazon (AMZN) -- Weekly
Source: Dynamic Trader

The price analysis on the daily chart only expands the price zones slightly as we are able to see a few more swings to run price relationships from. They come in at $241.18-$242.05, $235.24-$239.80 and $228.43-$233.73. We are currently testing the high end of support here. Besides the price support we are currently testing, note the pink histograms below the chart represent a clustering of Fibonacci time cycles that increase the odds for a possible reversal back to the upside. The cycles come due Oct. 12 and then Oct. 17-19.

Bottom line: In the next week or so, I am stalking a buy entry in AMZN in light of these time and price support parameters. I like to wait for reversal indications before placing a bet. The safest bet can be made if you wait for the 5-bar Exponential Moving Average (EMA) to cross above the 13 EMA on the daily chart; however, this could take some time to occur and you will need to be patient.

If you are OK with a slighty riskier entry, you may also go down to a 30-minute chart and wait to see the 8 EMA cross above the 34 EMA along with taking out a prior swing high on that same chart. At that point, your risk can be defined below the low made prior to the reversal signal.

If there are no buy triggers against these support zones, I will stand aside until further notice. The minimum upside target for a move off this area comes in at the $270 area if the bullish scenario does start to play out.

Click here and here for more information on trigger entries.

Amazon (AMZN) -- Daily
Source: Dynamic Trader

In this third Amazon chart, I'm illustrating an example of a 5 EMA crossing the 13 EMA.


Amazon (AMZN) -- 5 Exponential Moving Average (EMA) crossing 13 EMA
Source: Dynamic Trader

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