Amazon: More Sideways Consolidation Before The Rally To 3800 Starts?
Dr. Arnout ter Schure | Nov 10, 2020 04:00PM ET
Almost two months ago I showed in my article that Amazon (NASDAQ:AMZN) had started a correction to ideally around $2800 before the next and final leg higher to $3800+ would commence. So far it has traded as low as $2870s and has since remained in a rather side-ways holding pattern with little progress, other than the rally into the Oct. 12 high.
Such is the nature of corrections: they often take many twists and turns that are hard to foresee. Looking at the weekly timeframe the current price action suggests a triangle is forming (blue dotted lines). If so, it should ideally rally back to around 3400-3425 for red wave “d?”, fall back to around $3100 for red wave “e?” and then launch to ideally as high as $3948 for a classic wave-5 = wave-1 relationship (green arrow).
But, if AMZN is able to close above the upper blue dotted descending trendline, say a weekly close above $3425, from current levels, then it increases the odds tremendously (black) wave-4 already bottomed last week in what I would then label as an irregular (failed) flat where (red) wave-c did not travel below the end of (Red) wave-a. In that case I expect AMZN to reach around $3747 ideally (2nd green arrow) for (black) wave-5. The third alternative is a direct move lower to around $2800 first.
AMZN weekly candle stick chart with technical indicators and preferred Elliott Wave count/h3
Thus, currently, AMZN is a bit in a no-mans-land from an Elliot Wave perspective, as there are always several options during side-ways corrections, with not a lot of good EWP-based trading setups. And, yes, knowing one does not have a clear answer now is fine. Markets are not always straight forward and recognizing that can prevent one from over-trading and unnecessary losses.
All in all, the recent price action since the early-September high looks more like a sideways consolidation after a massive 100% run up in five months then anything else. Thus, I continue to expect the $2800 level to hold, and possibly have AMZN form a triangle before breaking higher. Any move above $3425 from current levels, will have me switch gear and strap on my Bullish hat. Until then, there is still a few more if’s and but’s AMZN may need to be subject to before moving higher. So, watch those blue trendline for clues on a breakdown and breakout.
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