Amazon Helps Pull Market Higher After Bouncing Within This Pattern

Amazon.com, Inc AMZN gapped lower to start Thursday’s trading session before popping up above Wednesday's high-of-day after the CEO of Worldwide Amazon Stores, Doug Herrington, sold a total of 4,000 shares of the company.

The e-commerce and streaming giant’s move higher helped to pull the S&P 500 up slightly from its low-of-day despite Apple dragging the index down to start the session.

From a technical analysis perspective, Amazon bounced up from the lower ascending trend line of a symmetrical triangle pattern, indicating the formation is being recognized by algorithms.

A symmetrical triangle pattern is created when a stock forms a series of lower highs and higher lows between a descending and an ascending trendline, which meet on the right side of the chart to form an apex. The pattern indicates that the bulls and bears are equally in control.

A symmetrical triangle is often formed on lower-than-average volume and demonstrates a decrease in volatility, indicating consolidation. The decreasing volume is often followed by a sharp increase in volume when the stock breaks up or down from the pattern, which should happen before the stock reaches the apex of the triangle.

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The Amazon Chart: Amazon started to trade in a symmetrical triangle Aug. 3 and has been making a fairly consistent series of lower highs and higher lows. The most recent lower high was formed on Sept. 1 at $139.96 and the most recent higher low was printed at the $133.16 mark on Thursday.

• Bullish traders want to see the stock eventually break up from the upper descending trend line of the triangle, which could cause the stock to enter into a longer-term uptrend. Bearish traders want to see Amazon break down from the pattern, which could accelerate downside pressure.
• A move to the upside is slightly more likely if Amazon can continue to trade above the 50-day simple moving average (SMA) on the daily chart. On Thursday, the stock tested the 50-day SMA as support and bounced up from that area.
• Amazon has resistance above at $136.83 and at $142.18 and support below at $131 and at $125.93.

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