Amazon Stock Pulls Back Into Bullish Pattern As Market Digests Jobs Data

Amazon.com, Inc. AMZN opened lower despite reports it plans to launch Amazon-branded smart TVs in the U.S. next month. The stock was affected by the general markets opening lower due to a massive jobs report miss.

The U.S. reported job gains of just 235,000 in August, which missed the consensus estimate of 750,000, largely weighed down by the stagnant leisure and hospitality sector. The market bear break saw no follow-through, however, and by mid-morning the major indices were rebounding. Although the jobs numbers were disappointing, the miss could help ward off a potential tapering announcement when the Federal Reserve meets later this month.

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The Amazon Chart: Amazon smashed into a support zone at the $3,435 level Monday morning and bounced. The stock has been consolidating a 10% move higher that took place between Aug. 23 and Sept. 1. The rise from the $3,200 level to $3,529 paired with the consolidation that has taken place since Tuesday has formed Amazon’s stock into a bull flag pattern.

When Amazon printed its second-quarter results the stock gapped down over 7% lower the following day. Over the past few weeks, Amazon has soared up into the gap but has yet to completely close it. There is still an empty trading range between $3,529 and $3,579 and because gaps fill 90% of the time it is likely Amazon will fill the rest of the gap in the future.

Amazon is trading above the eight-day and 21-day exponential moving averages (EMAs) and on Aug. 31 the eight-day EMA crossed above the 21-day, both of which are bullish indicators. Amazon is also trading above the 200-day simple moving average which indicates overall sentiment in the stock is bullish.

• Bulls want to see continued consolidation on low volume and then for big bullish volume to come in and break Amazon’s stock up from the bull flag pattern. If the pattern is recognized Amazon will move up to fill the gap but may pause temporarily at a resistance level near $3,552.
• Bears want to see big bearish volume come in and drop Amazon’s stock down below support at the eight-day EMA, which would negate the bull flag pattern. If Amazon loses the level as support, it could fall toward the $3,326 mark.