Stock Trading Predictions & Technical Analysis: AMZN

Saturday, October 24, 2009

AMZN - Strong Rally

AMZN -STRONG BUY SIGNAL (confirmation very likely on Monday)

AMZN rallied very strongly on Thursday's after-hours and closed at an all time high on Friday up +26.80% at $118.49 (hitting a high of $119.65) with very strong volume. Hitting a new high is always a very bullish move of course, but just like AAPL not only did it hit an all time high it had big break out, which makes AMZN look even stronger. The MACD & Stochastic both gave us a BUY SIGNAL, while the RSI has entered overbought territory. Based on what I can see now, I think AMZN may move a little higher before pulling back to most likely $110.00. AMZN next Fibonacci Retracement levels at 38.2% and 50% would predict moves to $127.92 and $135.89. AMZN is currently standing almost exactly at its 23.6% level which is at $118.07. AMZN other retracement levels of 68.1%, 76.4% and 100% predicts possible moves towards $143.85, $153.70, and $169.62, respectively.

So, for people looking to go long AMZN here is how you should plan on when to enter. Your goal right now should be to enter AMZN as close as to $110.00 (assuming this support level will hold up). At whatever price you decide to go long, you should set a stop loss order of $107.00 -$108.00.It is possible for AMZN to simply continue up strongly from current levels, and enetering at around $118 should be relatively safe since it's only just below -7.00% from $110. Therefore if you get the chance to enter AMZN at around $118.00 or closer to $110 with a bounce back up, you can then put a Stop Loss order at around perhaps $107.00 to $108.00. Your potential loss if the price were to pullback should not be more than -7.00% to -8.00%, and going long at higher prices will force you to bear on more risk and a higher potential loss in the event where the price pulls back. The reason for that is that based on what the charts say now, any pullback from current levels could eventually send AMZN back towards $110.00 before bouncing back up (keep in mind that it will not necesssarily be exactly $110, it could hit $108 or $112 before it bounces back). Therefore, if you were for example to enter AMZN at $125.00 and simply set a -8.00% stop loss at $115.00, you would most likely get whipsawed. This mean that you could expect your stop loss to get triggered at $115.00 and fall as low as $110.00 and then bounce back up and most likely back over $115.00 and continue its trend up. This is just to explain to you how you should manage your risk. Keep in mind that AMZN could simply continue higher next week and create new support levels higher than $110, and perhaps at $118.00. Therefore if you could take a long position anywhere $118.00 it should be relatively safe, whether AMZN continues higher or if it pulls back immediately it should hold up around $110.00. The goal when you enter into any long position, is to go long as close as possible to strong levels reducing your chances of taking on a loss or of getting whipsawed. Keep in mind that AMZN is currently giving us a STRONG BUY SIGNAL, that will most likely be confirmed as a STRONG BUY either if it moves higher on Monday or falls and hold up or bounces back up $110.00. Keep in mind, that if you see AMZN falling on Monday, don't jump in immediately wait and see first if it manages to stay above $110.00, because a sharp fall below would give us a SELL SIGNAL and a possible reversal to $95.00-$100.00. Personally I really don't see that happenning though, and AMZN STRONG BUY will most likely be confirmed on Monday.

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.