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The Technicals Behind Amazon's Bounce Higher


An executive summary of Amazon's technicals: Why it stayed intact and exactly what should trigger your exit or short.

After clinging to long-term support for over two months, Amazon (AMZN) was in do-or-die mode. As early as February, pundits were calling for an Amazon nose dive. And although it looked and felt tense, there were a few important technical items that needed to be understood before writing the stock off, or even shorting it:

1. Long-term trend lines rarely break upon first approach - and, as such, Amazon's stayed intact. Therefore, there was no need to go short for any longer than a day or two quick-hitter trade.

2. The move from 246 to 166 was measured. And further, the .382 down Fibonacci retracement lined up with the bottom of the measured move. This supports the theory of a hold and bounce.

3. After hitting RSI 30 on the initial drop, the RSI held above 30 throughout the turbulence and exploded higher.

See charts below.

This isn't as much a bullish article about Amazon as it is about respecting the technical setup. If the technicals start to break down, then caution is warranted. And furthermore, if the long-term trend line breaks, then it's time to exit the long side and possibly short.

Currently, Amazon is stuck between the .382 (197.43) & .500 (206.84) Fibonacci up retracements. A break above 207 could elicit a move to 220 (.618 fib retrace).

Have a great day.

Editor's Note: Andrew Nyquist is an independent investor based in the Minneapolis area. This article originally appeared on his investing and economics site, See It Market. His writings also appear on Minyanville's blog community.

Twitter: @andrewnyquist
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No positions in stocks mentioned.

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