What's Next For Amazon Stock?

Shares of Amazon.com, Inc. AMZN have dropped to a critical level. As expected, there is support for shares around the $3,520 level.

There is support here because it was previously a resistance level. Resistance levels can convert into support because of buyer’s remorse.

Why It's Important: Investors who sold their shares at the resistance level, in this case $3,520, thought they made a good decision after the shares trended lower. But when they broke through and traded higher, many of these investors regret their decision to sell.

A number decided to buy their shares back. But they will only do so if they can get them for the same price they sold at. So, they place their buy orders at their selling price.

What's Next: These orders create support. This could put a floor under Amazon's stock.

But if the support breaks, it means the buyers have finished their orders and left the market. With this demand out of the way, the stage will be set for the downtrend to resume.