is in a perfect formation to make a high-probability trade.
ChartWatch has followed AMZN many times in the past. Though my
research has primarily been bullish - $231 target
, $252 target
and finally a prediction of
a huge bounce
in November - I offered ChartWatch readers an extremely bearish
prediction in January.
I made this forecast ahead of AMZN's January earnings
announcement, anticipating about a 15% haircut. I based my belief
that AMZN was
going to plummet
from similar chart patterns in late 2011 (blue arrows and
circles), which you'll have to read about in more detail from the
This chart shows the price of
shares along with some important trend lines to
So I expected AMZN to top in January, much as the shares did
15 months earlier. Though the shares formed a high in January,
the ensuing decline has been far less dramatic than I'd hoped for
as a short seller. In fact, AMZN has hardly lost the type of
ground to bearish traders that I expected.
Despite the lack of bearish momentum, the pattern from 2011
indicates that AMZN will want to touch the 200-day moving average
(black line) before ending this current consolidation phase. This
is an important bit of information to have because it opens the
door to two excellent trades.
First, the 50-day moving average (orange line) should act as a
resistance zone before price touches the 200-day moving average.
So if the shares were to rally this week and into next without
testing the 200-day, traders can initiate short positions at the
There is also the possibility that AMZN will begin to slide this
week. In that scenario, swing traders should be ready to buy at
the 200-day. The chart from 2011 shows that AMZN bounced hard off
that trend line before curling over to new lows.
So watch both moving averages closely this month. They should
provide you with quick gains by early April.
Equities mentioned in this article: AMZN
Positions held in companies mentioned above: