Is Amazon (AMZN) approaching a top? What heresy! What blasphemous talk! I am not trying to actually pick a top in this stock but I want to present two charts this afternoon that are different from what I usually use in my short presentations. As I told my new class of students at Baruch College Monday night - let's keep an open mind.
In this weekly bar chart of AMZN, below, we used a log scale to display the prices. AMZN has rewarded patient investors who bought in 2015 or early 2016 around $500. Today AMZN reached $2,000. We could take out a ruler and drawn an uptrend line and then we could draw a line parallel to the uptrend line for a channel. If you did that you would find that AMZN was touching the return line of that channel . Below the price chart is the volume histogram and volume has slowed this year from back in January. In the middle panel is an overbought-oversold indicator called the stochastic indicator. Since June this indicator could be making what is called a "triple divergence top pattern". In the lower panel is the 12-week price momentum study which shows that momentum has slowed since March. This is a bearish divergence.
Ready for the second chart?
In this monthly Japanese candlestick chart of AMZN, below, we can see a pattern from last October called "eight to ten record highs"- there are nine record monthly highs as I count them. AMZN could go on to make a tenth record monthly high but in this coming month of September I would be on the lookout for a top reversal pattern. We might see a doji or a hanging man or something else. I am not trying to call the top but I am looking to be prepared.
Bottom line: What did I say and what should you do? All I said was that after a very long rise in the price of AMZN I see some patterns that give me pause. I did not say sell. I did not say go short. I did not say write at-the-money calls. Just keep an open mind as we move into September.