Amazon Approaching Prime Technical Support

For Amazon.com, Inc. AMZN investors, going an entire month without making a new all-time high is a strange feeling. However, after surging as high as $1,083 in late July, Amazon stock has taken a month-long breather, pulling back to below $950 and testing one of the few technical support levels the stock has at this high altitude.

Following a disappointing earnings report, traders are looking to Amazon’s chart to determine whether or not the stock’s recent lag is simple consolidation or something more sinister.

Amazon is now knocking on the door of the $950 level, a key technical support level. Amazon bounced off $950 on three previous pull-backs, once in early June, once in early July and once earlier in August. If $950 holds once again, the current consolidation period may closely resemble the stock’s late 2016 pullback from $847 to $710. Amazon didn’t make fresh all-time highs from October 2016 to February 2017, nearly four months of mostly sideways trading. If $950 holds for Amazon in the coming days, the $950 level may serve as good of an entry point as $710 was in November 2016.

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However, if Amazon dips below $950 in a meaningful way, it could be a sign of a deeper correction for the stock, similar to its 31 percent pullback from $696 to $474 in early 2016. A similar 30 percent pullback from recent highs would land the stock at around $760, meaning major downside ahead.

Still, even a 30-percent pullback wouldn’t necessarily spell bad news for long-term investors. Patient Amazon investors have ridden out the downturns to a 1,170 percent overall gain in the past decade.