This Calls for Some Caution on Amazon

 | Oct 11, 2017 | 1:58 PM EDT
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Amazon (AMZN) has been showing some price weakness since it spiked higher in late July. The slope of the 50-day moving average line has been bearish since early August. The On-Balance-Volume (OBV) line has been weakening. While all this is going on with the charts, we have fundamental analysts bumping up their price targets.

I have nothing against fundamental analysts except that I think some of them get bullish on the highs and bearish on the lows. We both look at past data to make forecasts, but I use the most up-to-date information when I look at prices. This is not to say I don't get it wrong at times, it is just pointing out a difference in approach.

Let's take a look at the prices and indicators for AMZN.

In this daily bar chart of AMZN, above, we can see a sideways to lower trading range from May. The trading range is not that bearish when you only look at the prices, but the indicators suggest selling has been significant. AMZN rallied strongly from November through the end of July. The 50-day moving average had a positive slope. The OBV line signaled aggressive buying and the MACD oscillator stayed above the zero line -- all bullish. Since the end of July, the indicators went into reverse. The OBV line weakened significantly. The 50-day average is declining and the MACD oscillator is below zero.

In this weekly bar chart of AMZN, above, we have mixed technical signals. Prices are above the rising 40-week moving average line, but it will not take much of a decline to test and/or break this long-term indicator. The weekly OBV line is overall bullish but the line peaked in July just ahead of prices. The MACD oscillator peaked in June and gave a bearish crossover take-profits sell signal in late July.

In this Point and Figure chart of AMZN, above, we can see a possible distribution pattern with a potential downside price target is the $856 area. A rally above $1,010 will turn this chart more positive and a decline to $923 will weaken this chart.

Bottom line: AMZN has been weakening the past four months. This may not be really significant but it is a difference from the strength seen since early 2015. While many or too many market watchers are calling for a "melt up," it may be better to grow more cautious.

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