Amazon (AMZN) is trading lower Friday in reaction to a mixed earnings report Thursday evening.
Let's check out the charts of this e-commerce giant.
In the daily bar chart of AMZN, below, I can see the shares in a longer-term downward trend the past 12 months. Price rallies have failed at the juncture of the declining 200-day moving average line in March and August and maybe in early February.
Trading volume has been more active since early November and that is a positive as it tells me that investors are showing more interest in the shares. The On-Balance-Volume (OBV) line has only increased in January. The Moving Average Convergence Divergence (MACD) moved above the zero line in January for an outright buy signal but we need to watch whether the two moving averages contract.
In the weekly Japanese candlestick chart of AMZN, below, I see the price action of the past three years. The chart shows three rallies within the downward trend. All three rallies are steep and we know that two of these steep rallies failed. The jury is out on the durability of this current rally. The slope of the 40-week moving average line is still negative.
The weekly OBV line only shows a slight improvement in January. The MACD oscillator has crossed to a cover shorts buy signal but an outright buy signal is not at hand.
In this daily Point and Figure chart of AMZN, below, I can see an upside price target in the $127 area.
In this weekly Point and Figure chart of AMZN, below, I can see an upside price target in the $175 area.
Bottom-line strategy: AMZN has rallied sharply in a short period of time. In the normal course of events I would expect a pullback/correction. How deep and how long this correction lasts will be key on whether AMZN becomes a buy.
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