Amazon vulnerable for further downside pressure as US-China trade talk looms

Amazon's technical chart is not showing any signs of recovery despite a 17% decline since 11 Jul 2019. (AMZN)

click to enlarge charts

Key Levels (1 to 3 weeks)

Pivot (key resistance): 1765.10

Supports: 1692.70, 1585.60 & 1467.80

Next resistances: 1855.30 & 2035.80/2050.50

Directional Bias (1 to 3 weeks), a multinational technology giant that has business operations in e-commerce, cloud computing, digital streaming and artificial intelligence. Given its leadership in the U.S e-commerce industry, its share price movement can be used a gauge to dissect the health of the U.S. consumers as discretionary spending via e-commerce has taken over a significant portion of market share from traditional “brick & mortar” retailers.

Also, Amazon is a key component stock in the U.S. benchmark stock indices as it has the 3rd largest weightage in both the S&P 500 and Nasdaq 100.

Bearish bias below 1765.10 and a break below 1692.70 reinforces a further potential downleg to target the next medium-term supports at 1585.60 and 1467.80 next. On the other hand, a clearance with a daily close above 1765.10 negates the bearish tone for a push up towards to retest the 12 Sep 2019 swing high of 1855.30.  

Key elements

  • After a retest on its current all-time high level of 2050.50 on 11 Jul 2019, AMZN has declined by -17% and right now its price action is just 0.75% away from its 03 Jun 2019 swing low area of 1692.70; an important medium-term swing low as it has shaped a V-shaped reversal from it to retest its all-time high level printed in 04 Sep 2019.
  • The recent rebound from 03 Oct 2019 low of 1685.06 is likely to be considered as corrective/dead cad bounce as its latest price action has gapped down and formed a daily bearish candlestick yesterday after a daily “Doji” candlestick formed on Mon, 07 Oct. These observations suggest sentiment has turned negative after a lack of bullish conviction to push prices higher.
  • In addition, the daily RSI oscillator remains below a significant corresponding descending resistance at the 45 level and has not reached an extreme oversold level. These observations suggest that medium-term downside momentum of price action remains intact.
  • The key medium-term resistance of 1765.10 is defined by the upper boundary of a descending channel in place since 11 Jul 2019 high and the former range support from 05 Aug/28 Aug 2019 low.
  • Relative strength analysis against the market (S&P 500) and its sector (Consumer Discretionary) as seen from the respective ratio charts are suggesting further potential underperformance of AMZN.

Charts are from eSignal 

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.