Amazon.com (AMZN - Get Report) was down $22 at $1,024.40 Friday afternoon. Thursday it gapped higher at the open to its all-time intraday high of $1,083.31, only 1.6% below my quarterly price target of $1,100.75. Then came the mind-boggling volatility.
The first warning was weakness to the price gap, which was the July 26 high of $1,053.20. This followed a technical axiom that gaps are almost always filled. My call on Thursday was: Weakness will hold the five-week modified moving average of $1,005.15, which held at the after-hours low of $1,001.08. Upside is to my quarterly risky level of $1,100.75.
The thing to worry about Friday is today's close. If the stock ends below last week's low of $1,003.81, that's a weekly "key reversal." This occurs because the stock set an all-time intraday high, then closed below the prior week's low, warning that investors should shift into a "sell on strength" mode.
The weekly chart for Amazon is likely to be downgraded to neutral, even if Friday's close is above its five-week modified moving average of $991.29. Why? The close will be well below the all-time high set this week, forcing the 12x3x3 weekly slow stochastic reading to slip below the overbought threshold of 80.00.
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