Zinger Key Points
- Amazon formed a double bottom pattern on Thursday and Monday, suggesting the stock could trade higher.
- For a new uptrend to occur, Amazon will eventually need to retrace and print a higher low.
Amazon.com, Inc AMZN was popping up over 4% in the premarket on Tuesday in response to consumer price index data that showed inflation slowed in November.
The Labor Department reported headline CPI rose 7.1% year-over-year in November, down from 7.7% in October and below the 7.3% average economist estimate.
The lower-than-expected number caused the S&P 500 to surge up almost 3%, breaking through the 200-day simple moving average.
The S&P 500 has been dragged down recently by Amazon and Tesla, Inc TSLA, the latter of which has been trading near 52-week lows for a few weeks.
If Amazon can make a move north, it could propel the S&P 500 into a bull cycle, at least in the form of a Santa Claus rally.
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The Amazon Chart: Amazon broke down bearishly from a triangle pattern on Dec. 5 and continued to fall lower over the two trading days that followed to reach a 52-week low of $85.87. Since then, Amazon has been trading sideways near the low on decreasing volume, which suggested the stock could be running out of sellers.
- On Dec. 8 and Monday, Amazon printed a double bottom pattern at the $87.88 level, which indicated the stock was likely to trade higher on Tuesday. Amazon also printed a hammer candlestick and closed near the high-of-day on Monday, both which are bullish signals.
- If Amazon doesn’t trade down to fill the gap left behind on Tuesday, it’s likely to happen eventually because gaps on charts fill about 90% of the time. Bullish traders would prefer to see the stock immediately sell off to fill the gap, which could also provide a solid entry point for bullish traders who aren’t already in a position.
- Althought Amazon will negate its downtrend on Tuesday, the stock will need to retrace lower in order to print a higher low over the next few trading days. Once that happens, a new uptrend will be confirmed, which would give bullish traders more confidence going forward.
- Amazon has resistance above at $90.77 and $92.18 and support below at $80.03 and $87.88.
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