Amazon Attempts To Bounce In A Pattern: Is A Bullish Break On The Horizon?

With inflation remaining stubbornly high and the chances of a recession increasing with each of the Federal Reserve’s rate hikes, Amazon.com, Inc AMZN continues to cut costs, this time by deciding to close eight Amazon Go stores.

The news, combined with upward movement in the S&P 500 on Wednesday, caused Amazon to edge slightly higher after some early trading session volatility.

From a technical perspective, Amazon also tested the median line of a falling channel pattern as support on Wednesday and bounced up from the level. The pattern is bearish for the short term but can be bullish down the road.

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For bearish traders, the "trend is your friend" (until it's not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.

Bullish traders will want to watch for a break up from the upper descending trendline, on high volume, for an entry. When a stock breaks up from a descending channel, it's a powerful reversal signal and indicates a rally is likely in the cards.

The Amazon Chart: Amazon started trading in a longer-term downtrend within a descending channel pattern on Feb. 6 but most recently, the stock has entered into a short-term uptrend within that pattern. Amazon’s most recent higher high was formed on March 6 at $96.55 and the pattern was confirmed on Wednesday, when the stock printed a higher low at the low-of-day.

• If Amazon is eventually able to break up from the upper descending trendline of the falling channel, a longer-term reversal to the upside could be in the cards. Bearish traders will want to see a rejection of the upper range of the pattern and can watch for a possible bearish reversal candlestick to form at the upper trendline.
• If Amazon can break bullishly from the pattern, the stock will regain the 50-day simple moving average as support, which would give bullish traders more confidence going forward. For that to happen, Amazon will require higher volume levels.
• Amazon has resistance above at $95.49 and $99.88 and support below at $92.18 and $90.77.