Amazon Consolidating A Decline Below Its 200-Day Moving Average. Here’s How To Trade The Stock Now.

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Amazon.com (AMZN) It broke below its 50-day and 200-day simple moving averages on January 4. The January 10 low of $3,126 is down 16.9% from the November 19 high of $3,762. It is a double-top with a prior high of $3,773 set on July 13, 2021.

Some Wall Street analysts have questioned Amazon’s $19 billion annual spending on engineering. This concern puts share price behind rivals Alphabet, Apple
AAPL
, Meta and Microsoft
MSFT
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Amazon.com is not cheap. According to Macrotrends it has a P/E ratio of 63.18% and the company does not pay dividends. Amazon had outpaced earnings-per-share estimates for five consecutive quarters. The series ended with its earnings report released on October 20 when it matched expectations.

Daily Chart for Amazon.com

Amazon’s daily chart shows trading ranges over the past 52 weeks. The lower end of the range is set at 2,881 on March 5, 2021. The high end of the range is $3,773 which was set on July 13, 2021. It was a gain of 30.9%. This wide range is being consolidated. The huge difference in prices on 30th July was due to negative reaction of earnings release after the closing bell on 29th July.

Note that since this price difference the stock traded around its 50-day and 200-day simple moving averages, now at $3,441 and $3,394. Amazon closed below these moving averages on January 4, 2022. The stock was down from monthly and yearly pivots to $3,264 and $3,196, respectively, at a January 10 low of $3,126, which are two horizontal lines. Amazon shares are trading at $3,248 between these lines this afternoon.

Weekly Chart for Amazon.com

The weekly chart is negative for Amazon, with the stock trading below its five-week modified moving average at $3,358. The stock is trading well above its 200-week simple moving average or reversal from the $2,421 mean. The horizontal line at the top of this chart is a half yearly risky level at $3,867. The 12x3x3 weekly slow stochastic reading is declining at 28.44.

Trading Strategy: A buy on Amazon shares weakening on its annual pivot at $3,196. Short holdings on consolidating your 200-day simple moving average at $3,394.

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