Technical Analysis Lessons From AMZN

If you are interested to know why AMZN went up so much, this lesson will show you why AMZN was able double its stock price.

In this article we will examine:

  • Why AMZN's price shot up
  • A trend following method
  • Some candlestick patterns in AMZN

It is always great to study past charts as price action keeps on repeating itself in the stock market. Those who want to catch the next biggest winners and those who like to trade price action will no doubt find this lesson beneficial and useful.

Stock Is In An Uptrend

I think the most important lesson to take away from AMZN is that you should trade and invest in stocks that area making an uptrend.

A stock that is in an uptrend tends to go up more and more.

Let's take a look at the daily chart of AMZN below.

If you study the chart above, you will realize that AMZN is in a nice daily uptrend. It is easy to spot a stock that is in an uptrend. They are above:

  • The rising 20 MA
  • The rising 50 MA
  • The rising 200 MA

The 20 MA, 50 MA and 200 MA can be used as a trend following tool.

AMZN fits this criterias and it has been trading above the rising 20 MA, 50 MA and 200 MA most of the time.

AMZN experienced a gap up on heavy volume. When a stock gaps up on heavy volume and when the stock is in an uptrend, it tells us that there is a lot of buying interest. Therefore, the stock is very likely to move higher in the future.

Next, AMZN experienced a triangle breakout pattern. When a stock is in an uptrend and forms a continuation pattern, it is very likely to continue to move higher when it breaks out of the pattern.

As the stock rose, it experienced a correction in February 2018 when the whole stock market collapse. The sell off also drag down AMZN's stock but it immediately formed a bottoming tail at the rising 50 MA. It rose after the appearance of that pattern and broke above a short term downtrend line and continued to move higher.

AMZN later gap down below its 50 MA and entered into a period of sideways trading. But it formed a variation of an ascending triangle and this help to send it higher for a few days.

In the past few days, AMZN had a correction and formed a bottoming tail. With the appearance of the bottoming tail, it is possible for AMZN to bounce up the next few days.

Let's take a look at the weekly chart of AMZN.

Notice how it went up so much and even doubled in price. Well, one of the reason is because the stock is in a strong bullish technical picture. It is trading above the weekly 20 MA, 50 MA and 200 MA most of the time. This is a picture of strength.

When a stock is in a weekly uptrend, any breakout is a possible buy.

Notice how the stock went higher each time it broke out of a consolidation. If AMZN can break above the current resistance, then it is likely to continue to move higher and make new highs.

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