Thursday, May 12, 2016

AMZN Amazon Monthly Chart Overbot Rising Wedge Negative Divergence

Amazon prints above 700. Bernstein targets a $1000 price. CEO Jeff Bezos is carried around the lobby on the shoulders of happy employees watching the stock price grow to the sky.

The negative divergence across all indicators on the AMZN weekly chart was highlighted at the end of last year with a spankdown predicted, which occurred. However, Amazon was expected to come back up since the monthly chart had long and strong profiles for the indicators into the doji top in December (green lines). Price has come back up after the spankdown from the weak weekly chart.

AMZN appears to be printing a significant multi-year top moving forward. The red price candlesticks show the smack down from December to February corresponding to the neggie d on the weekly chart. That played out and price now came back up for higher highs. Note the indicators are all neggie d (red lines) on the monthly chart above except for the MACD  line that wants to see another matching or higher high in price after a pull back occurs in this monthly time frame. With price now above the December highs, the negative divergence with the RSI, histogram, stochastics and money flow is ominous.

So two potential paths are forecasted both call for a significant multi-year top to occur in Amazon say between now and August. The blue line in the margin represents a sharp drop, similar to the drop from December, which would occur due to the neggie d. The blue line then recovers for THE top in June-August when the MACD line will negatively diverge representing the peak for AMZN. The purple line shows a path for price to make a quickie pull back, say during the rest of May into early June, then price comes back up to satisfy the MACD positivity in a quicker time frame. So the higher high in price occurs, say in June printing the multi-year top with the MACD turning neggie d.

It is never wise to short a hot momo stock. But the most speculative and risk-taking traders could consider a short play on Amazon. Simply be aware that the monthly MACD line wants price to come back up again after any pull back in the monthly time frame. Keystone does not hold a short position in AMZN currently. If you enjoyed the ride up in Amazon on the long side, it would be prudent to scale out of the position, say in three or four exits between now and July. Keystone will likely wait for the MACD line to turn neggie d, probably in June or July, and consider a short on AMZN at that time.

The Amazon party is peaking out over the coming weeks. By the end of this year, Amazon employees will ignore Bezos and talk negatively behind his back as the stock price continues sideways to sideways lower. Note how price likes to back kiss the 20-week MA, now at 499 and rising. Thus, 500-550 is a downside target and with all the bounces off the 20 over the last few years, AMZN is due for a failure that could get quite ugly. Do not enter AMZN on the long side. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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