Amazon.com Inc. (NASDAQ: AMZN) rallied on December 26th, breaking above 1830, which is the upper boundary of the sideways range that had been containing most of the price action since August 5th. The recovery continued, albeit at a slower pace, and yesterday, the stock hit resistance at 1921. As long as the price is trading above the upper end of the range, we would consider the near-term outlook to be cautiously positive.
That said, we would stay careful of a possible setback before the bulls decide to take charge again, perhaps for the share to challenge the 1830 hurdle as a support this time. If it rebounds from there, we may see another test at 1921, the break of which could allow the price to reach the 1955 zone, near the inside swing lows of July 18th and 22nd. Another break, above 1955, could carry larger upside extensions, perhaps setting the stage for the 2025 area, marked by the high of July 16th and slightly below the peak of July 11th.
Our daily oscillators detect slowing upside speed and corroborate our view that a corrective setback may occur before the next positive leg. The RSI has flattened near its 70 line, while the MACD, although above both its zero and trigger lines, shows signs of topping.
However, in order to abandon the bullish case, we would like to see a dip back below 1800. This may signal the stock’s return within the pre-mentioned range and could allow declines towards the 1730 zone, which supported the price action between November 18th and December 12th. If that hurdle fails to halt the slide, then we may see a test near the lower bound of the range, at around 1685.
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