Amazon Trails The SPY: Can The Stock Catch Up In 2022? A Technical Analysis

Despite Amazon.com, Inc AMZN holding a 3.9% index weighting in the SPDR S&P 500 SPY, the stock has been travelling inversely to the ETF over the last two trading days.

On Monday, when the SPY gained 1.42% over the Dec. 22 closing price, Amazon fell 0.8%. On Tuesday, the SPY was consolidating by trading mostly flat while Amazon rose almost 1.5% higher at one point.

Amazon has trailed the SPY through 2021 and is currently trading up about 5% higher since the markets opened for the year on Jan. 4 compared to the SPY, which has soared about 27% higher since this year began. Amazon may be poised to catch up next year, and on Dec. 13 Cowen analyst John Blackledge named the stock a top mega-cap pick and a best idea for 2022.

Toward the beginning of February, Amazon will print its fourth-quarter and full-year 2021 earnings and traders and investors will be watching to see if the stock runs up into the event. If any information is released that hints Amazon brought in better-than-expected revenue during its holiday sales events investor sentiment could swing bullish especially after Amazon guided to fourth-quarter revenue of between $130 billion and $140 billion, which missed the consensus estimate of $142.1 billion.

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The Amazon Chart: Amazon has been holding above a long-term ascending trendline, which has acted as support since Oct. 1. On Tuesday, the stock tested the trendline as support and wicked up from the level, which demonstrates bulls bought the dip.

Amazon stock is working to print an inside bar pattern on the daily chart, with all of Tuesday’s price action occurring within Monday’s trading range. The inside bar leans bullish because Amazon was trading higher before forming the pattern and both bulls and bears can watch for a break up or down from the pattern on Wednesday to gauge future direction.

The stocks daily trading volume indicates consolidation, which aligns with the theory behind an inside bar. By midafternoon, about 1.89 million Amazon shares had traded hands compared to the average 10-day volume of 3.02 million. When Amazon breaks from the inside bar pattern, traders will want to watch for increasing volume to confirm the formation was recognized.

Amazon is trading slightly above the eight-day exponential moving average (EMA) but below the 21-day EMA, which leans bearish. The stock is also trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.

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• Bulls want to see big bullish volume come in and break Amazon up from the inside bar pattern, which would help the stock to regain the moving averages as support. Amazon has resistance above at $3,444.15 and $3,497.51.
• Bears want to see big bearish volume come in and drop Amazon down below the ascending trendline, which could indicate a bear market is on the horizon, at least for the short term. Amazon has psychological support below at $2,400 and support in the form of price history at $3,326 and $3,230.98.
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