There’s just three weeks until Amazon (AMZN) announces Q4 earnings. So it’ll capture the market’s attention even more than usual.
After a horrific 2022, the tech and e-commerce giant had a massive 2023. Its stock finished up over 80%.
That’s still a long way, though, behind its July 2021 all-time high of $188.65.
Last year, the broader market correction began in mid-July. And AMZN finally succumbed to the sell-off in September.
But then its next rally kicked off in late October with its big Q3 earnings beat.
Yet that didn’t last. AMZN topped out and slid through December.
So let’s see what’s in the cards from here…
Struggling for Momentum
The chart of AMZN below shows its huge turnaround at the start of 2023.
Going into 2023, the longer-term 50-day Moving Average (MA, blue line) had been trending strongly lower. AMZN was down over $100 from its highs.
Amazon.com (AMZN)
Source: e-Signal
In the bottom half of the chart, the Relative Strength Index (RSI) showed that AMZN was struggling to find any positive momentum.
That all changed when the RSI bullishly broke into its upper range (above the green line) in early January.
Apart from a brief dip from February through March, that’s where the RSI remained until AMZN retraced in September.
Throughout this rally, the chart shows how the 10-day MA (red line) mainly stayed above the 50-day MA. And both MAs tracked higher.
You can also gauge the strength of AMZN’s momentum by its price action around the middle of the year.
When the broader market started tanking in July, AMZN kept grinding higher. That rise continued till it finally rolled over in September.
During that correction, the RSI bearishly returned to the bottom half of its range. And the 10-day MA crossed back below the 50-day MA.
Fueled by its big Q3 earnings beat, however, AMZN reversed and gapped higher in late October. Then it got caught up in the “Fed-pivot” rally.
This caused AMZN to gain as much as 30% in the space of just two months.
Take another look:
Amazon.com (AMZN)
Source: e-Signal
Yet with the rally overcooked, AMZN struggled to break higher by mid-December.
Instead, momentum started to wane as the RSI slipped down from near overbought territory (upper grey dashed line). And AMZN started to track lower.
This temporarily saw the RSI fall through support.
But we’ve seen more positive signals over these past couple of days. And the chart suggests that AMZN could be setting itself up for another run.
So what are the key things I’ll be watching from here?
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Keeping an Eye on This Signal
The RSI recently broke up through resistance (green line). It must remain in its upper band if AMZN is to rally.
As we discussed, this is where the RSI stayed for most of its seven-month rally at the start of 2023. And it remained in its upper range again when AMZN surged from late October through December.
But I’ve also got an eye firmly fixed on our 50-day MA…
When AMZN retraced from its December high, its move down petered out right on the 50-day MA. So the 50-day MA acted like a support level.
If the 50-day MA keeps acting as support and the 10-day MA rises, we’d likely see AMZN rally into Q4 earnings.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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