Is Amazon stock approaching a buy or break zone?

February 26, 2021 09:42

Amazon technical analysis

The global stock market rout continued in yesterday’s trading, led by a 3.5% fall in the Nasdaq 100 stock market index - the biggest drop since October. 

An outsized surge in bond yields spooked stock market investors who are now rushing to exit risk assets. Especially the stocks that have soared in value in recent months such as the big-name tech stocks. 

Just take a look at the surge higher in Amazon’s monthly chart below:

Amazon Monthly ChartSource: Admiral Markets MetaTrader 5, #AMZN, Monthly - Data range: from Apr 1, 2011, to Feb 25, 2021, performed on Feb 25, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

One notable feature in the chart above is just how far the price is away from the 20-period (blue) exponential moving average. The last bounce off this level was in March 2020. Moving averages can often act as support and resistance levels where turning points in stock prices can occur. 

In the daily chart below, the price of Amazon shares is approaching a historic level of horizontal support at the ~$2,888.00 price level. This could be a bounce or break moment for the stock. Are buyers going to bargain hunt at these levels, or will sellers breakthrough?

Analysing the price action and sentiment at this level will be critical in determining what we see. If more money moves into bond yields which are now trading a better premium than the S&P 500 dividend yield, a stock market rout could just be the beginning. 

Amazon Daily ChartSource: Admiral Markets MetaTrader 5, #AMZN, Daily - Data range: from May 18, 2020, to Feb 25, 2021, performed on Feb 25, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results. 

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