Amazon.com, Inc (NASDAQ:AMZN) was trading slightly higher Friday, showing strength in comparison to the S$P 500, which was trading about 0.3% lower.
The e-commerce giant reversed into an uptrend on March 15, and on March 28 the stock broke up from a bull flag pattern Benzinga called out one trading day prior, which confirmed the uptrend.
An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart.
The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods. Traders can use moving averages to help identify an uptrend with rising lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term uptrend and rising longer-term moving averages (such as the 200-day simple moving average) indicating a long-term uptrend.
A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.
In an uptrend the "trend is your friend" until it’s not and in an uptrend there are ways for both bullish and bearish traders to participate in the stock:
- Bullish traders who are already holding a position in a stock can feel confident the uptrend will continue unless the stock makes a lower low. Traders looking to take a position in a stock trading in an uptrend can usually find the safest entry on the higher low.
- Bearish traders can enter the trade on the higher high and exit on the pullback. These traders can also enter when the uptrend breaks and the stock makes a lower low indicating a reversal into a downtrend may be in the cards.
See Also: Read How Amazon's 2022 Warehouse Union Election Set It Apart From 2021
The Amazon Chart: The most recent higher low on Amazon’s chart was printed on March 24 at the $3,201 level and the most recent higher high was created at the $3,416.63 on March 29. On Friday morning, Amazon slid slightly lower to reach the $3,246.39, which may serve as the next higher low within the trend.
- If Amazon closes the trading session near its opening price or at the high of day, it will print a long-legged doji candlestick or a hammer candlestick, respectively, on the daily chart, which could indicate a reversal to the upside is in the cards. If the stock closes the trading day near its low-of-day, however, it could indicate lower prices are in the cards for Monday.
- The uptrend will remain intact unless Amazon falls below the March 24 low-of-day but bullish traders would prefer to see the stock regain support at the eight-day exponential moving average later on Friday or on Monday.
- The move lower on Friday was on lower-than-average volume, which indicates a healthy period of consolidation is taking place. As of early afternoon, only about 1.44 million Amazon shares had exchanged hands compared to the 10-day average of 3.19 million.
- Amazon has resistance above at $3,326 and $3,444.15 and support below at $3,230.98 and $3,131.06.
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