Amazon.com Inc (Amzn) Technical Analysis April 2020



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FAANG TA April 2020

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Amazon.com Inc (AMZN) fell a maximum of around 25% from its $2190 peak on 19th February 2020 in the last couple of weeks of massive market selloffs. The subsequent rally saw it gaining back a chunk of that loss but with the COVID-19 Pandemic showing no signs of subsiding anytime soon and the depth of its economic effects is yet to be defined, it is prudent to be wary of this sudden spike especially with bear market levels having been triggered and a recession likely in the horizon (or at the very least a bear market). Investing in stocks may become a risky proposition in this kind of environment. After all, no one truly knows where the bottom really is or how long the bear market will last.

It would totally suck if what happened in 2000 were to happen to our stock portfolio – read about this here in detail:


A lesson from history that we should not forget

However, a stock market crash (which the past several weeks were), a bear market and a recession have historically been – in retrospect – the best opportunities to buy stocks because it is during these times when others are selling that we may get to buy them at a discount.

But where do we buy? At what price levels? Because unless we have unlimited cash, we won’t be able to buy all the drops.

Dollar cost averaging is certainly a good way to go about it. Buying at pre-determined intervals may be one of many strategies that one can choose to adopt.

Another method is to use technical analysis.

I personally like to buy at historical support levels when selling pressure seems to have dried out.

In the current atmosphere, this is the kind of level I look to buy the stocks that I have on my watchlists.

This post will look at the potential long term support and resistance levels of Amazon.com Inc (AMZN).

In the current market condition, buying in tranches at potential supports and resistance-turned-support may be the more prudent approach to investing.

Monthly chart

Amazon swung pretty wildly in March 2020 from a high of around $2000 to a low of around $1626 before closing at $1949.

At the current price, it is quite close to the $2030 resistance and the previous month high of $2000. Should it fail to successfully breach this resistance, it could head back down towards the $1626 support area.

Should it break the $2030 resistance, it could attempt to breach the $2186 all-time-high area and find new highs.

If the bears win though, it may consolidate around the $1626. If even this support level is broken, we may see $1300 in the long run.

Is this a likely scenario?

Covid-19 and an overdue bear market aside (both of which are facts, as well as a possible recession and as of yet unknown extent of Covid-19 economic impact), another important question to consider is whether Amazon is still a growth stock or is it maturing and transitioning into a value stock?


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Weekly Chart

The weekly chart shows a still intact uptrend shown by the moving averages with the shorter 50-period smoothed moving average (SMA50) trending above the longer 200-period moving average (SMA200).

However it should be noted that the uptrend is weakening and prices are consolidating, shown by the sideways movement of the price, the flattening upwards movement of the SMA50 and the general flat ADX (black line) and convergence of the +DI and -DI.

Conclusion

At the time of writing on 1st of April 2020, I am cautious about entering any position in Amazon – or any stock in any market for that matter. The large up move the past week or so has still not confirmed a continuation of the uptrend in Amazon.

The Covid-19 pandemic is still not under control and its full economic impact is still not evident. This may take a few quarters after the pandemic is brought under control to be truly clear. In the mean time, with bear levels having been triggered, I am personally being more cautious, but not sidelining the market.

Some of the greatest wealth is made during the worst of times. The Covid-19 pandemic may be a once in a lifetime opportunity to buy quality stocks at discounted prices.

Common Investing Wisdom

I bought the recent crash down at logical, strategic areas and plan to continue doing so if the market continues to fall. Buying at potential historical supports is one way I do this.

If you want to know my other strategies for taking advantage of the current weak market, get regular FREE technical analysis of global stocks and other investing tips and opinions, don’t forget to subscribe to Netflyp Finance Newsletter:



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