Eye on Amazon - Market Analysis for Feb 16th, 2012

It is interesting that into the Valentines Day recovery rally high at 193.57, which peaked just shy of fully testing a significant resistance line at 195.00 (at the time), Amazon (AMZN) pivoted to the downside and attracted the ire of a Wall Street research analyst (MS), who downgraded the stock to Equal Weight from Overweight.

Be that as it may, from a technical perspective, let's notice that the sharp decline nonetheless has not violated the lower zone of the 8-week base pattern, in the vicinity of 172.00 to 168.00, at least not so far.  Thus, the acute weakness still must be considered another test of support within a still-developing base formation that remains very much intact.

That said, I do not yet have confirmation that the decline from 193.57 to 175.14 is a completed leg within the base. My micro pattern and momentum work suggest strongly that AMZN still has unfinished business on the downside that will retest the Feb 1 low at 172.00 prior to my expectation of a powerful upside reversal.

In addition, let's also keep in mind that Apple (AAPL) is not participating in today's NDX recovery rally, which will make it more difficult for AMZN to reverse the impact of the MS downgrade. 

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