AMZN: Waiting for a Juicy Little Bounce

Primary Chart: AMZN's Primary Downtrend with Parallel Channel, Daily 8 and 21 EMAs, Fibonacci Levels

Summary:
1. SquishTrade's longer-term view is bearish. In the short-term, prices could bounce to retrace the first wave of decline from the November 15 high at $103.79.
2. Short-term bounce targets are $100. After the bounce reverses lower, downside price targets are $78-$82.
3. The existence of a primary downtrend suggests probabilities favor more weakness ahead despite any bounces that may occur into early December or year end. But the existence of a secular uptrend suggests that prices could behave in a more complex manner, whipsawing around the secular uptrend, or even surprising to the upside for a while given the length, and therefore strength, of this very long term trendline. So be ready for anything.
4. Reacting with flexibility to the levels and the technical patterns is a better approach than blindly relying on a forecast, even if the forecast is well reasoned, and even if it was produced by some sort of expert.


SquishTrade is waiting for a juicy little bounce in AMZN. That bounce may help determine whether the corrective rally off the YTD lows is finished.

• At the outset, SquishTrade holds a longer-term bearish view on AMZN. Please see the technical basis for this bearish view in the chart and post below. This longer-term view is slightly complicated by the fact that the primary trend (over the past year) is on a collision course with a 25-year secular uptrend.
  
  Supplementary Chart A
  
  
  
  In the short-term, an imminent bounce looks possible. A falling wedge pattern, shown below in Supplementary Chart B, typically provides a bullish signal. But if it breaks bearishly, that would be more damaging and bearish, more surprising and unexpected, potentially causing a steeper than normal selloff. This is because the pattern catches market participants off guard by breaking in the opposite direction from what is expected.
  
  Supplementary Chart B
  
  
  
  
  
• To determine whether the corrective rally off the YTD low is finished, evaluate any near-term bounces and whether they remain below the November 15 peak at $103.79. Any short positions should be entered with key risk levels defined, and if a short were entered around $99-$102, the November 15 high at $103.79 might be an excellent invalidation point—depending of course on the risk tolearance, overall trading approach, and position size (position size is integrally related to the stop or invalidation level). Here is an intraday chart showing a hypothetical illustration showing one way this bounce could unfold as a short setup:
  
  Supplementary Chart C
  
  
  
  If the bounce reverses underneath the November 15 high and shows confirmation of the next leg down, then a reasonable target lies at the $78-$82 range. This is support at the lower edge of the parallel channel as well as an area with key Fibonacci projection targets and the 25-year secular uptrend (depending when exactly the next leg down occurs, as that 25-year trendline's slope causes the support level to rise over time).
  
  
  
• If the bounce takes out the November 15 high at $103.79, however, then the corrective rally has not completed. In this case, the corrective bounce off the lows may have further to run before AMZN likely reverses back lower. If the November 15, 2022, highs are taken, consider the upper Fibonacci clusters (the higher yellow circle on the Primary Chart) where price may chose to reverse lower. This level is at $112-$113.
  
  
  
• In short, SquishTrade favors AMZN to go lower to $78 to $82 within the next couple months. The main forecast is lower over time. The short-term forecast is potentially higher in a bounce first. The bounce could run to upper 90s or even $100 in one scenario. Or the bounce could run to key Fibonacci levels at $112-$113 if the so-called Santa Rally materializes in December 2022.
  
  Bold predictions abound on social media for markets and stocks and cryptos. Many like to call the bottom repeatedly as prices continue to fall. Some like to call for much lower lows for years into the future. Both are possible, and it's possible no one is right if price just chops sideways for years.
  
  And the reality is that no one can actually predict the future with any certainty. Technical analysis is about knowing the patterns, seeing the levels and reacting to the way price unfolds when it encounters and responds to these patterns / levels. It helps to remain open and flexible to any outcome rather than reliant on a third-party forecast regardless whether its well reasoned and supported by complex cycles or De-Mark signals, and regardless whether every single Elliott Wave has been carefully labeled.
  

Thanks for reading. Let me know what you think too.

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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.

Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.

DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.

Comment:

For a while today, it seemed as though AMZN might be heading for the gap fill at $89-$90. But OPEX pinning action has held SPX and major stocks relatively stable (i.e., within typical ranges for today) at least into the into the final hour of trading.

AMZN had a failed breakdown today below the .786 R at 93.17. This could be the basis for the possible short-term bounce discussed in the main post above, but keep in mind that the primary trend is down, so bounces like this are not super reliable to forecast or trade given that they are countertrend. But as discussed in the main post, the bounce may provide good short setup if the structure looks proper.

Finally, ST notes that indices and major equity names are in a tricky spot here. SPX has major resistance about 140 points above at 4100. DXY has neared a spot where it could reverse higher, and that could pressure indices.

Have a good weekend!

Trade closed: target reached:

This was a shorter term technical analysis. This was published November 17, 2022 when price closed at $94.85. The price target ultimately was a range of $78-$82. AMZN's price reached $81.69 on December 28, 2022. That is a hit within the range. SquishTrade does find that AMZN likely will head lower than the $78-$82 range this year. But for now, this post will be closed. If readers would like an updated AMZN analysis in the coming days, let me know in the comments.

Note that the analysis above provided two different price paths, each with a bounce. ST wanted the stronger bounce for a short, but that didn't happen. Instead, the weaker bounce occurred. One target provided for the bounce was $100 under the "weaker bounce" scenario. Price reached just below that level at $97.23 -- before heading right down to the bottom of the price channel and tagging the PT zone. It's great when TA can help us figure out where price may go!