Eye on Amazon - Market Analysis for Apr 25th, 2012

During the second half of March, when Amazon (AMZN) pivoted off of 180.30 and climbed to and through key multi- month resistance between 196-and 200.50, the larger Nov-Mar pattern resembled a powerful rounded base-like pattern that projected higher potential price targets at 215/218 and then at 227/229.

The only problem was that AMZN ran out of gas just shy of 210 on Mar 27, and then proceeded to implode beneath key "neckline" support at 200.50 to 196.00, into the 185-183 area.  This wrecked the integrity of the Nov-Mar base pattern, and at the very least, morphed it into something less bullish.

That said, the Mar-Apr decline has since "dug in" and established important and powerful support at 185.50- 183.65, which we see on the chart represents the near 5-month support line off of the December 29, 2011 low at 166.97. The recent pullback lows also represent a mini double-bottom along the aforementioned support line, that has generated strength that is challenging near term resistance at 194-195 (today).

A sustained climb above 194.60-195.00 will complete the mini-bottom, and will trigger near term upside targets in the 202-205 target zone. However, let's notice that all of the action during 2012 has carved out a large upslanted price channel, with the upper channel line residing at 214.50.

The ability of AMZN to sustain above 194-195 also triggers potential for the price structure to traverse the entire width of the channel- towards the 215 target zone thereafter. Only a complete give-up and down- side reversal that presses AMZN below 185.50 will invalidate my current constructive scenario. 

Amazon is the 8th-larger holding of the PowerShares QQQ Trust (QQQ), so ETF traders may want to keep a close eye on it.

  • Action-Oriented Trade Set-Ups in Stocks & ETFs
  • Macro Analysis of the Broader Markets
  • Detailed Technical Guidance for each Trading Idea
  • Live Interaction w/ Mike & Our Member Community
  • And Much, Much More!
Join Now! - Special Offer!
Veteran Wall Street analyst and financial author, Mike provides detailed and timely analysis and trade set-ups on a range of markets. Read more...

Have Mike's “Out Front” morning analysis delivered FREE to your email inbox twice weekly!