SSS - AMZN Logical Rally into 20-dma

Published : October 6 2011 at 11:41 ET

AMZN undercut our first downside price target at 104.74, the low of early September, as we discussed in our series of reports on AAPL, AMZN, and CMG on October 3, four trading days ago. The chart below shows what other levels might come into play if AMZN is unable to get back above the 20-dma, which so far seems to be serving as stiff resistance here intra-day. If you shorted AMZN four days ago and then covered on the undercut of the 104.74 level, you are looking at coming back in on AMZN on the short side as it rallies into the 20-dma, using the 20-dma, roughly, as your guide for an upside stop. AMZN appears to be developing as a late-stage base-failure, and is still in the early phases. The quick breakdown through the 104.74 low and the 50-day moving average three days ago was normal action, and nimble shorts know to cover on undercuts of prior lows in the pattern. Otherwise, if one is playing this out for a potential longer-term gain then the 20-dma remains in force as an upside stop with the idea that the 200-dma will come into play eventually as the second downside price target we would be looking for. The general market continues to rally, so we would expect that any reversal in individual stocks such as AMZN will be dependent on the market stalling out here.


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