While 3% isn’t exactly a make-or-break performance, it follows some weak performances this month.
Given how strong e-commerce has been and the quarter we just saw from FedEx (FDX) - Get Report, one would be inclined to think Amazon would be performing well. Throw in how well cloud stocks have been doing, and Amazon seemingly shouldn’t be faltering.
But it is and that’s something to take note of. It’s not just a member of the well-known FAANG group, but it’s a leader in the entire market. When the coronavirus outbreak hammered stocks, Amazon was one of the first tech stocks to begin leading the charge higher.
Its importance extends to its weighting in the Nasdaq, its relevancy within FAANG and its impact on investor psychology and sentiment.
Trading Amazon Stock
Take a look at the last few days worth of action. In early September, Amazon was trading at new all-time highs. Swiftly, shares were lower by almost 12.5% in two trading sessions, when measuring from the high to the low.
Over the next few days, Amazon continued to find support at the 50-day moving average. During that time, the 20-day moving average went from being support to be resistance.
However, on Friday Sept. 11th, Amazon broke and closed below the 50-day, which then acted as resistance on Monday, Tuesday and Wednesday of this week. Finally, the floor fell out, as $3,100 support broke when Amazon gapped lower.
Why the play-by-play highlight? To show how the tide has been shifting for Amazon for in the prior two weeks leading up to Thursday's action.
Now things get interesting. If bulls regain control, see if they can fill Thursday’s gap and reclaim the 261.8% extension near $3,100. Above puts the critical test of the 50-day moving average in play. Above that and we need to see Amazon stock clear the 20-day moving average and $3,250 area.
On the downside, let’s see how Amazon does with the $2,900 level — which was support in July — and the 100-day moving average. A close below both marks puts the two-times range extension in play near $2,750, followed by the 161.8% extension near $2,500.
Unfortunately for bulls, shares are currently in no man’s land. I would feel more comfortable waiting for a rally back up to $3,100 and possibly even the 50-day moving average on the upside. On the downside, I want to see how Amazon handles a dip to $2,900.
In short, traders need more clarity.