Amazon stock is down 12% for the week. Is the stock now a buy?
Here’s how the stock looks on the daily chart.
Amazon stock formed a double top at 3750 around the middle of Nov 2021 and then quietly pulled back. There was nothing alarming about the move. Amazon stock was anyways trading sideways for a long time. But last week the stock just collapsed and broke down below 3150-3200, the level from where it always bounced. A breakdown is never a buying opportunity?
Amazon Weekly Chart
As you can see in the weekly chart above, Amazon stock took off from the 50-week ma base near 1800 and rallied to 3550+, nearly 100% move between March 2020 and October 2020, and since then it traded sideways. One more thing, while it traded sideways, it always found support at 50-week ma. BUT Amazon stock 3 weeks back broke down below 50 week ma and since then it has been moving down.
Trading Rule: When a stock breaks one major moving average, it declines to the next moving average.
Amazon stock has broken both 50-week ma and 100-week ma and hence the stock is likely to decline to 200-week ma which as of today stands around 2450-2500. So if you are looking at buying the stock, wait until it declines to that level.
Amazon is scheduled to report results for the fourth quarter on Feb. 3
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purposes. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers
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