The Amazon.com (AMZN) Breakdown

Amazon.com (AMZN) has taken a beating over the course of the past two months after hitting all-time highs back in October. I know I’ve tried to trade it a couple of times with no success. The last time I tried it was when it was already well oversold, and testing the 200-day moving average. I was confident that it would bounce off of it, but boy was I wrong. It cut right through support like it was butter and I took a loss on it. 

But we’ve seen a lot of stocks take haircuts lately, and unlike some of its counterparts, (i.e. Netflix – NFLX) this stock isn’t going anywhere. In fact I would put AMZN in the same tier as Apple (AAPL) in the sense that they are cornering their market quite nicely, no one is really competing with them adequately, and they continue to expand and introduce new products and services, and new ways of just doing business in general. 

Here’s the Amazon.com (AMZN) Breakdown:

• Price support sits right at $181 over the past year, and yet again it has bounced off of it. Now we need to see if it can hold it in the face of new market headwinds. 
• Head and shoulders has confirmed, and textbooks would tell you it could/should drop as far as $155. Before settling down. 
• When reading volume, there are no clear patterns or signals that we should be alerted to. 
• I don’t believe AMZN will test $155. However, I believe at this juncture, whether it can hold on to the $181 price level depends largely on how much the market can bounce before heading lower yet again (should it do that), and the relative strength of AMZN against broader selling pressures in the market. If it can consolidate against market weakness, you have a definite buy signal.