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From A To Z: Amazon’S Stock Chart Is Worth Watching Today

 March 21, 2012 09:40 AM
 


Amazon.com, Inc.'s (AMZN) purchase of material handling technology firm Kiva Systems put some Red Bull into AMZNs stock. The price grew wings on the news and swung nearly $7 to the good side.

Analysts believe the acquisition will help the monster online retailer put fatter profits on the bottom line. Before management broke out the big wallet, Wall Street expected Amazon to earn 7 cents for the current quarter. iStock's earnings' model says brokers are sandbagging. We forecast at least 11 cents.

Once the ink dries and the deed is done, the "official" consensus number is likely to be revised up. We will be reviewing our iEstimate as well – stay tuned.

[Related -Level Watching and Swing Trade Planning for Amazon (AMZN)]

In the meantime, the street's algorithms aggressively banged the buy button yesterday. Shares turned 57% more volume than normal and pulled the 12-day average to the top-side of the 50-day mark. Another green day and the 26-day will put the 50-day benchmark in the rearview mirror too.

Many chart watchers wait for bullish crossovers to pounce. Toss in the MACD line moving into positive territory and AMZN's stock chart is sure to catch many a trader's eye.

Moving beyond the obvious, iStock spies a breakout from a pattern that usually means a powerful move is coming. In a classic, textbook fashion, Amazon's price thrust through the top side of a triangle (see below).

Triangles are important reversal patterns. Since mid-October 2011, Amazon's price has been under downward pressure. The stock fell from a 52-week high of $246.71 to a New Year's Eve low of $173.10.  For all of 21012, AMZN's top and bottom trend-lines have been converging a.k.a. a triangle.

[Related -Netflix, Inc. (NASDAQ:NFLX): Can Netflix Trump Amazon.com, Inc. With New Plans?]

Typically, the most dynamic breakouts occur on the 3rd of 4th attempt at a getaway. On cue, Amazon's jailbreak happened on try number four. Traders have to keep in mind that maybe a third of the time, shares will fall back to the escape point, $185ish.. 

Occasionally the stock will regain its bad triangle habits, but most of the time the return trip is just an attempt at EZ-money by shaking out weak hands. If our technical analysis is correct, iStock puts our initial near-term trading target at $210, with a secondary target of $220.  On the downside, a close below $179 is as low as we would be willing to go.

Amazon Technical Analysis Chart

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