Amazon.com Inc. (AMZN) has corrected sharply the past four months. The daily indicators are mixed right now but it looks like further near-term gains are possible in the weeks ahead.
Let's check out the charts to see how to position this widely followed name, discussed by Jim Cramer on Mad Money Friday night.
In the daily bar chart of Action Alerts PLUS holding AMZN, below, see can see a high in early September and retest in early October before prices declined some $700. The daily On-Balance-Volume (OBV) line peaked in early September and now shows a double bottom pattern in November and December. Prices are trading above the declining 50-day moving average line today and are within striking distance of the flat 200-day line around $1,700.
The trend-following Moving Average Convergence Divergence (MACD) oscillator has crossed to the upside three times in the past two months signaling cover shorts buys. The oscillator could soon cross the zero line for an outright go long signal.
In the weekly bar chart of AMZN, below, we can see that prices are trading below the flat 40-week moving average line. The weekly OBV line shows a decline the past four months, which signals to me that sellers of AMZN have been more aggressive.
The MACD oscillator is below the zero line in bear territory but the two moving averages that make up this indicator have begun to narrow toward a possible cover shorts buy signal.
In this Point and Figure chart of AMZN, below, we can see an upside price target of $1,855 being projected. A rally to this price will break the downtrend and gains above $1,780 could generate higher price targets.
Bottom-line strategy: In the very short term AMZN could back up or retreat $100 or more but there are enough technical clues telling us that prices could rally into the $1,800-$1,900 area and maybe higher. Traders with deep pockets can approach AMZN from the long side risking below $1,450 looking for gains to $1,850 and perhaps higher.