Will AMZN's Primary Downtrend Break Its Secular Uptrend?
تم تحديثه
Primary Chart: Primary Down Trendline from 2021, Secular Up Trendline from 1997, Long-Term Up TL from 2008 GFC Low, and Fibonacci Retracements from Covid 2020 Low
Summary:
1. This post provides a broader view of the technical environment within which AMZN's day-to-day price action takes place.
2. AMZN remains within a primary downtrend (see the parallel channel from the all-time highs). But it remains within a secular uptrend, and has tagged and remains near the secular up trendline from 1997. Such long-term trendlines could be drawn perhaps a bit higher or lower. SquishTrade drew it conservatively as possible from the bearish perspective. If the trendline were moved slightly higher, given its length, such a slight move results in a fairly large change in the current level. This is like adjusting an arrow slightly after it leaves a bow, and over time, a slight adjustment makes a huge difference in the destination.
3. Being within a primary downtrend but nearing a secular uptrend makes trades more tricky perhaps as the uptrend line is neared. But until the primary downtrend structure changes, SquishTrade favors a break of the 1997 up trendline after some messy whipsaws perhaps. The 14-year 2008 upward trendline broke earlier this year, although it was retested several times with some whipsaws as well.
4. A break of the secular up trendline puts Covid lows, coinciding with a Fibonacci levels, in play as a target. These lows and the Fibonacci levels range from $78 to $82. If the downward trendline breaks, SquishTrade forecasts that price will likely reach this range within 2 to 4 months (March 2023 at the latest).
5. A more aggressive target range lies at $64 to $67.
6. In the very short-term, it appears that a bounce is imminent, and this bounce may be sold before it reaches the most recent swing high. But this will be covered in a separate post to be published soon.
The Primary Chart shows AMZN's downtrend at the primary degree of trend. This is represented by a parallel channel on a logarithmic chart. A parallel channel on this weekly chart comprises both a down trendline across the material highs and a return line across the material lows.
This downtrend broke below the upward TL from the 2008 GFC low. That TL was retested several times after it was broken. Major long-term support and resistance levels are not broken easily, and often require more than one attempt. As the price action around this 2008 trendline illustrates, price may often retest or whipsaw around longer-term trendlines or longer-term levels.
In any event, this chart helps to keep AMZN trading in context. In the event a bearish flush takes place, check out the long-term secular uptrend line from 1997. Below is a broader view (zoomed out) of both the 2008 and the 1997 trendlines, combined with the current one-year down trendline from all-time highs:
Supplementary Chart A: Monthly Chart of AMZN's Long-Term Trendlines
Such long-term trendlines as the 1997 up trendline could be drawn perhaps a bit higher or lower. SquishTrade drew it conservatively as possible from a bearish perspective. If the trendline were moved slightly higher, given its length, such a slight move results in a fairly large change in the current level. This is like adjusting an arrow slightly after it leaves a bow, and over time, a slight adjustment makes a huge difference in the destination.
In short, AMZN is trading within a primary downtrend but also nearing a secular uptrend, and this makes trading, investing and forecasting more tricky as the secular uptrend line is neared. But until the primary downtrend structure changes, SquishTrade favors a break of the 1997 secular upward trendline after some messy whipsaws perhaps. The 14-year 2008 upward trendline broke earlier this year, although it was retested several times with some whipsaws as well.
A break of the secular up trendline puts Covid lows, coinciding with a Fibonacci levels, in play as a target. These lows and the Fibonacci levels range from $78 to $82. If the downward trendline breaks, SquishTrade forecasts that price will likely reach this range within 2 to 4 months (March 2023 at the latest). A more aggressive target range lies at $64 to $67. RSI on a daily chart shows that lower prices should be expected. Consider that momentum has remained in a downtrend as well for a while:
Supplementary Chart B: AMZN's RSI (Daily) in a Downtrend
Price could pause at the secular uptrend line, break below and whipsaw back above, or do a series of whipsaws above and below before choosing a direction. A good example of how price can whipsaw above and below a long-term trendline is seen on Apple's chart here. Over the past several weeks, AAPL has whipsawed above and below the line about seven times. That doesn't have to happen every time, but it should not be expected that price will slice through such key trendlines (assuming correctly drawn) like a hot knife through butter with no hesitation and no looking back.
In any case, the main argument here is that the primary downtrend must continue to be respected, especially when AMZN remains below the .618 and .50 Fibonacci retracements of its rally from December 2018 lows to November 2021 highs. The .618 retracement lies at $97.98, and the .50 retracement lies at $111.03. So the intermediate term forecast (2-4 months) is for price to continue trending lower to about the March 2020 pandemic lows and perhaps to the Fibonacci 1.00 projection area at $78, acknowledging that this move will not be in a straight line and that downtrends include highs—albeit lower ones at the degree of trend where the downtrend exists. But the secular uptrend from 1997 should be carefully watched. Shorts at this level are higher risk than shorts taken above the level, depending on the trading time frame.
This post is not exactly a trade idea, although it does forecast lower prices with some targets over the coming weeks and months. Rather, it attempts to provide a broader view of the technical environment within which AMZN's daily price action occurs. It's not quite as straightforward as the primary downtrend (yellow parallel channel) might suggest. In any event, seeing the longer-term view may help those who may approach AMZN with both short-term and long-term trading and investing plans.
Within the next few days, another short-term post will accompany this one with a short-term outlook (several days to a couple weeks).
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
Summary:
1. This post provides a broader view of the technical environment within which AMZN's day-to-day price action takes place.
2. AMZN remains within a primary downtrend (see the parallel channel from the all-time highs). But it remains within a secular uptrend, and has tagged and remains near the secular up trendline from 1997. Such long-term trendlines could be drawn perhaps a bit higher or lower. SquishTrade drew it conservatively as possible from the bearish perspective. If the trendline were moved slightly higher, given its length, such a slight move results in a fairly large change in the current level. This is like adjusting an arrow slightly after it leaves a bow, and over time, a slight adjustment makes a huge difference in the destination.
3. Being within a primary downtrend but nearing a secular uptrend makes trades more tricky perhaps as the uptrend line is neared. But until the primary downtrend structure changes, SquishTrade favors a break of the 1997 up trendline after some messy whipsaws perhaps. The 14-year 2008 upward trendline broke earlier this year, although it was retested several times with some whipsaws as well.
4. A break of the secular up trendline puts Covid lows, coinciding with a Fibonacci levels, in play as a target. These lows and the Fibonacci levels range from $78 to $82. If the downward trendline breaks, SquishTrade forecasts that price will likely reach this range within 2 to 4 months (March 2023 at the latest).
5. A more aggressive target range lies at $64 to $67.
6. In the very short-term, it appears that a bounce is imminent, and this bounce may be sold before it reaches the most recent swing high. But this will be covered in a separate post to be published soon.
The Primary Chart shows AMZN's downtrend at the primary degree of trend. This is represented by a parallel channel on a logarithmic chart. A parallel channel on this weekly chart comprises both a down trendline across the material highs and a return line across the material lows.
This downtrend broke below the upward TL from the 2008 GFC low. That TL was retested several times after it was broken. Major long-term support and resistance levels are not broken easily, and often require more than one attempt. As the price action around this 2008 trendline illustrates, price may often retest or whipsaw around longer-term trendlines or longer-term levels.
In any event, this chart helps to keep AMZN trading in context. In the event a bearish flush takes place, check out the long-term secular uptrend line from 1997. Below is a broader view (zoomed out) of both the 2008 and the 1997 trendlines, combined with the current one-year down trendline from all-time highs:
Supplementary Chart A: Monthly Chart of AMZN's Long-Term Trendlines
Such long-term trendlines as the 1997 up trendline could be drawn perhaps a bit higher or lower. SquishTrade drew it conservatively as possible from a bearish perspective. If the trendline were moved slightly higher, given its length, such a slight move results in a fairly large change in the current level. This is like adjusting an arrow slightly after it leaves a bow, and over time, a slight adjustment makes a huge difference in the destination.
In short, AMZN is trading within a primary downtrend but also nearing a secular uptrend, and this makes trading, investing and forecasting more tricky as the secular uptrend line is neared. But until the primary downtrend structure changes, SquishTrade favors a break of the 1997 secular upward trendline after some messy whipsaws perhaps. The 14-year 2008 upward trendline broke earlier this year, although it was retested several times with some whipsaws as well.
A break of the secular up trendline puts Covid lows, coinciding with a Fibonacci levels, in play as a target. These lows and the Fibonacci levels range from $78 to $82. If the downward trendline breaks, SquishTrade forecasts that price will likely reach this range within 2 to 4 months (March 2023 at the latest). A more aggressive target range lies at $64 to $67. RSI on a daily chart shows that lower prices should be expected. Consider that momentum has remained in a downtrend as well for a while:
Supplementary Chart B: AMZN's RSI (Daily) in a Downtrend
Price could pause at the secular uptrend line, break below and whipsaw back above, or do a series of whipsaws above and below before choosing a direction. A good example of how price can whipsaw above and below a long-term trendline is seen on Apple's chart here. Over the past several weeks, AAPL has whipsawed above and below the line about seven times. That doesn't have to happen every time, but it should not be expected that price will slice through such key trendlines (assuming correctly drawn) like a hot knife through butter with no hesitation and no looking back.
In any case, the main argument here is that the primary downtrend must continue to be respected, especially when AMZN remains below the .618 and .50 Fibonacci retracements of its rally from December 2018 lows to November 2021 highs. The .618 retracement lies at $97.98, and the .50 retracement lies at $111.03. So the intermediate term forecast (2-4 months) is for price to continue trending lower to about the March 2020 pandemic lows and perhaps to the Fibonacci 1.00 projection area at $78, acknowledging that this move will not be in a straight line and that downtrends include highs—albeit lower ones at the degree of trend where the downtrend exists. But the secular uptrend from 1997 should be carefully watched. Shorts at this level are higher risk than shorts taken above the level, depending on the trading time frame.
This post is not exactly a trade idea, although it does forecast lower prices with some targets over the coming weeks and months. Rather, it attempts to provide a broader view of the technical environment within which AMZN's daily price action occurs. It's not quite as straightforward as the primary downtrend (yellow parallel channel) might suggest. In any event, seeing the longer-term view may help those who may approach AMZN with both short-term and long-term trading and investing plans.
Within the next few days, another short-term post will accompany this one with a short-term outlook (several days to a couple weeks).
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
ملاحظة
This chart was published mid-November 2022. AMZN's primary downtrend *did* in fact break it's longer-term uptrend. And note that the long-term uptrend was drawn conservatively as possible, i.e., meaning every benefit of the doubt was given to favor the multi-decade uptrend's continuation rather than reversal. (At major decision points (all time frames), when there is doubt about whether a trend will continue or reverse, it helps to favor trend continuation rather than reversal). Trendlines can be drawn with a bit of subjectivity in placement. Here, it could be drawn a smidge higher. In any event, the primary downtrend crashed through this long-term trendline. But, it appears a TL like this may not go quietly. Will price move up for a retest? Perhaps it may.
ملاحظة
Here is an updated view of the long-term TL (log chart) on a monthly chart for ease of viewing many years w/o scrolling back and forth:ملاحظة
Here is a weekly chart showing that AMZN bounced right at Covid 2020 lows. It also clearly shows how the primary downtrend (since the ATH) has smashed through two *major* down trendlines. This Covid 2020 low seems like a logical place to bounce and move up for a retest of the 1997 TL that has only been broken slightly when looking at monthly / week charts (about 3 weeks total below it).
SquishTrade
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