Amazon Surges Higher Following Bullish Inflation Data: Here's What To Watch For

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.

Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.

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.