Amazon Orders Surge - What Do the Stock Charts Say?

Amazon.com shares should trade up to at least its semiannual pivot at $2,078.34 as the online retailer's orders are surging during the pandemic.
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Amazon.com  (AMZN) - Get Report shares are gently higher on the news that it plans to suspend its service for non-Amazon deliveries to focus on the surge in orders prompted by the covid-19 pandemic. 

And a technical look at the Seattle e-commerce giant says the stock should trade up to at least its semiannual pivot at $2,078.34. That's 3.3% above the stock's Tuesday close at $2,011.

Shares of FedEx  (FDX) - Get Reportand United Parcel Service  (UPS) - Get Report are benefiting from the Amazon decision. Here’s the coverage of this story as reported by TheStreet.com.

Amazon shares have been trading around their 200-day simple moving average over the past 52 weeks. They've been above this key level since March 23, when the average was $1,856.67.

After the company beat quarterly earnings estimates on Jan. 30, the stock gapped higher on Jan. 31 and set its all-time intraday high of $2,185.95 on Feb. 11. 

After nearing this level again on Feb. 19, the stock began a correction with the market. Its March 16 low was $1,626.03 for a bear-market correction of 26%.

Since the low, shares of Amazon rose above their annual pivot at $1,771.99 on March 18. Then moved above their 200-day SMA on March 23 and are now approaching the semiannual pivot at $2,078.34.

The stock is not cheap. Its p/e multiple is nearly 87 and the stock pays no dividend, according to Macrotrends.

The Daily Chart for Amazon

Thw Daily Chart For Amazon

Thw Daily Chart For Amazon

Courtesy of Refinitiv XENITH

The daily chart for Amazon shows that the stock has moved sideways over the past 52 weeks, tracking its 200-day simple moving average, now at $1,856.68. 

You can see the stock gapped higher on Jan. 31 on a positive reaction to earnings reported after the close on Jan. 30. 

This set the stage for a quick spike higher to its all-time intraday high of $2,185.35 set on Feb. 11. The near test of this high on Feb. 19 can be considered a double-top.

As the coronavirus spread around the world, shares of Amazon gapped below their semiannual pivot at $2,078.34 on Feb. 24. 

The stock then bounced off its annual pivot for 2020 at $1,771.99 on March 9 but gapped below it on March 12. The stock moved back above this key level on March 18.

If the stock has the momentum to get above its semiannual pivot at $2,078.34, the upside is to a new high as its quarterly risky level is above the chart at $2,188.74. 

The April value level is $1,850.87.

The Weekly Chart for Amazon

The Weekly Chart For Amazon

The Weekly Chart For Amazon

Courtesy of Refinitiv XENITH

The weekly chart for Amazon is positive, with the stock above its five-week modified moving average of $1,927.37. 

The stock is well above its 200-week simple moving average, or reversion to the mean, at $1,398.82. That has not been tested over the past five years.

The 12x3x3 weekly slow stochastic reading is projected to rise to 48.58 from 44.65 on April 3.

Trading Strategy: Buy weakness to the monthly and annual value levels at $1,850.87 and $1,771.99, respectively, and reduce holdings on strength to the semiannual and quarterly risky levels at $2,078.34 and $2,188.74, respectively.

How to use my value levels and risky levels:

The closes on Dec. 31, 2019 were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each uses the last nine closes in these time horizons.

Second quarter 2020 and monthly levels for April were established based upon the March 31 closes.

New weekly levels are calculated after the end of each week.

New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.

My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in.

To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

How to use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.

The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best.

The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold.

A reading above 90.00 is considered an “inflating parabolic bubble” formation that is typically followed by a decline of 10% to 20% over the next three to five months.

A reading below 10.00 is considered as being “too cheap to ignore” which typically is followed by gains of 10% to 20% over the next three to five months.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.