Technical Analysis Of AMZN

After running up by more than 90% in 12 months, is this the time to sell AMZN. Let us look at the charts and see what they are telling us.

The bull run in Amazon is nothing short of spectacular. In just 12 months, Amazon's stock price has run up by more than 90%. An impressive feat for such a big company.

Along the way, it has propelled Jeff Bezos to become the richest man in the world. Richer than Warren Buffett and richer than Bill Gates. 

I don't think Jeff Bezos will be selling the majority of his shares at the moment, but for investors who bought Amazon, is this the time to start selling your Amazon shares? History has proven to us that a fast run-up is usually not sustainable. Which is why investors should sell on the way up and not on the way down.

Fundamental analysis will help us to spot great stocks. It will help us to choose the best company that produces spectacular earnings in years to come.

However, it is technical analysis and the trend that will help us to uncover weaknesses in a stock even before the fundamentals start to crack.

Therefore, in this article let us look at the trend and price action of AMZN to see if one should start to trim down on Amazon shares. 

The chart above shows the daily chart of Amazon. As you can see, the run up has started to look a bit parabolic. Whenever stocks have a fast run up, it is a good idea to use a simple trend following tool to help us catch the majority of the trend.

You will never be able to catch the exact top but at least it will give you a realistic way to catch the meat of the move.

You can use the rising 20 MA to catch the majority of the trend when a stock is moving up too fast. So far, the stock is still trading above the rising 20 MA but I would advise you to be very cautious if AMZN falls below the 20 MA.

You can already see that the price action these past few days have been quite erratic. That is usually a sign of a top.

The chart above shows the weekly chart of AMZN. One of the ways to be realistic about the movement of stocks is to use the measured move.

The measured move is where you take the height of the previous run up before a correction and project it upwards from the base of the current move up to get a target. As you can see, each time AMZN reaches the measured move target, the stock corrects. 

Amazon has overshoot the current measured move target. This is quite risky. While this does not mean the stock will have a big crash tomorrow, it does tell investors to be realistic and expect a correction anytime soon. In addition to that, AMZN formed a topping tail last week.

A topping tail or a shooting star usually warns of a top. A correction often follows this pattern. Therefore, one should be very cautious right now with AMZN.

If you have not bought AMZN, this is perhaps not the time to buy the stock. If you own AMZN shares, perhaps you might want to sell some of your shares to book some profits.

Charts with the Freestockcharts.com label are courtesy of Freestockcharts.com

Charts with the investing.com logo are courtesy of Investing.com powered by Trading View

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