Is Amazon about to break out to all-time highs?
Shares in Amazon have remained remarkably unloved since the last quarter of 2020. While the stock rallied more than 70% last year, it has remained in a trading range for most of the past six months. Most of the big tech companies have faced headwinds recently that have been masked by the surge in demand for them during the coronavirus pandemic.
As the chart below shows, Amazon’s share price has remained in a very tight range and has formed a symmetrical triangle or wedge pattern. This can be typical after a period of an extended trend where momentum starts to fade.
Source: Admiral Markets MetaTrader 5, #AMZN, Weekly - Data range: from Sep 15, 2013 to Jan 21, 2021, performed on Jan 21, 2021, at 8:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
It’s not the first time Amazon shares have experienced a long-term range. During 2018 and 2019, the stock traded in between an ascending triangle formation as shown by the black horizontal line and ascending trend line. Price managed to breakout during 2020 and rose sharply for months.
The most recent trading range that has developed over the past several months is more evident on the daily chart shown below. Price has been trading in-between the descending resistance line and ascending resistance line for the most of last year.
Source: Admiral Markets MetaTrader 5, #AMZN, Daily - Data range: from Apr 21, 2020 to Jan 21, 2021, performed on Jan 21, 2021, at 9:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.
Sellers tried to break through the lower support level early in the year but failed to gain any traction. Now price is trading back to the top of the trading range, traders will be eyeing a potential break of this resistance and the wedge pattern for a push towards the all-time high price level at around 3,505.00
With an upcoming earnings announcement due on 2 February, traders will be watching for clues in the price action on whether or not buyers will continue to build positions in anticipation of good report. With positive reports in other big tech companies like Netflix, investor optimism is high.
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According to BarChart, analysts still remain long-term bullish on Amazon’s share price, as shown below:
Source: BarChart, January 21, 2021
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