Two Amazon Charts Investors Need To See

Amazon

AMZN
bottomed at $81.43 on January 6, 2023 and this day ended with an upside key reversal as the close at $86.08 was above the January 5 high of $85.42. Another buy signal occurred on May 26 when this day ended with a golden cross. This signal occurred when the 50-day simple moving average rose above the 200-day simple moving average.

The weekly chart shows that Amazon is extremely overbought and below its “reversion to the mean” at $133.13.

Amazon.com is not cheap. Its p/e ratio is 158.27% and they do not pay a dividend, according to Macrotrends. The company missed earnings-per-share estimates in four of the last seven two quarters.

The Daily Chart for Amazon.com

Courtesy of Refinitiv Xenith.

The daily chart for Amazon shows the 56.7% bear market decline from the high of $188.10 set on November 19, 2021 to the low of $81.43 set on January 6, 2023. The death cross that formed January 26, 2022 was the signal to reduce holdings on strength. The stock was below its 200-day simple moving average from January 4, 2022 until May 10, 2023. Tests of this declining moving average occurred on March 29, 2022, August 16, 2022 and February 2, 2023.

The 2023 low of $81.43 was set on January 6, 2023. This day was a key reversal buy signal as the close that day was above the high of $85.42 on January 5.

There was a price gap higher on May 10 when the stock opened above its 200-day SMA then at $106.30. The high for 2023 has been $131.40 set on July 3, 2023. This strength resulted in a golden cross confirmed on May 30. Today the 50-day and 200-day simple moving averages are $119.92 and $104.37.

The horizontal lines from bottom to top are the third quarter value level at $86.03, the monthly pivot at $112.66, the annual risky level at $161.11, and the semiannual risky level at $168.17.

The Weekly Chart for Amazon.com

The weekly chart for Amazon is positive but extremely overbought. The stock is above its five-week modified moving average at $124.15 but below its 200-week simple moving average or ‘reversion to the mean’ at $133.13. The 12x3x3 weekly slow stochastic reading is well above the overbought reading of 80.00 at 92.62. This reading above 90.00 is a reason to book profits now.

Stochastic readings scale from 0.00 and 100.00. A measure above 80.00 is overbought and a measure below 20.00 is oversold. The reading above 90.00 is a warning that the upside from current levels should be limited.

Trading Strategy: Buy shares of Amazon on weakness to its 200-day simple moving average at $104.37. Reduce holdings on strength to its ‘reversion to the mean’ at $133.13.