Remember last year, and the year before that, and the year before that, when Amazon would just rip higher all the time? That uptrend came to an abrupt halt last Fall, and $AMZN came tumbling down like many other stocks around the globe. After almost a year of consolidation, it appears as though Amazon shares are ready to get going again.
That 2015-2016 correction in stocks is a major point of reference for us. In many International Indexes and US Sectors, that correction that ended in early 2016 is where we started a new cycle. Amazon is no different.
Here we are looking at the Extension Levels from that correction and they are still coming into play today. Notice how $AMZN stopped going up at exactly the 685.4% extension of that correction. Along the way, you can see that these levels played an important role in all the ups and downs the last few years:
But why does this matter? Well, for me it matters because the weight of the evidence is suggesting that this is simply a consolidation within an ongoing uptrend. I see little evidence that suggests otherwise. We know this is not a downtrend. So it’s either an uptrend or a sideways trend.
In order to confirm that JC is right, and this is in fact a consolidation within an ongoing uptrend that should resolve higher, we need it to….wait for it…..resolve higher!
The set up here makes sense to me. We only want to be long $AMZN if we’re above 2000. If we’re below that, then the market, to me, is indicating that demand has yet to absorb all of this overhead supply. In that case there is both downside risk that I don’t want to be a part of, and opportunity cost (what else can I do with this money). In either of those scenarios, we do not want to be long. This is a situation only worth participating in if we’re above 2000, which were last year’s highs and where we failed again this May.
Target-wise, I think we can get close to 3000 which is 50% higher than current levels. We’re only adding about half a trillion dollars in market cap under those conditions, so let’s think a little more tactically for now. 2500 represents the 161.8% extension of the 2018-2019 correction and is where we want to be taking profits on this trade.
Also see: Fibonacci and the Dow