Corey Rosenbloom, of AfraidToTrade.com, takes a technical look at one of the top performing stocks of 2015 that continues to get stronger, notes the new price level for short-term traders to now focus on, but also warns that buying now would be highly risky given the overextended swing in price.
Wow! Amazon.com (AMZN) has been one of the top performing stocks of 2015 as the stock continues to get stronger.
Let’s update our charts and note the new price levels on which to focus for short-term traders:
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The current upswing extended further after the strong, high volume gap above $600.00 per share.
Note the multiple days to the upside as an impulsive breakout carried price above $660.00 per share.
Breakouts occur due to a feedback loop where buyers buy (for obvious reasons) but also sellers (short-sellers) buy to cover losing positions.
Amazon.com simply reminds us of our core principle that “Stocks which are strong tend to get stronger.”
Nevertheless, buying now would be highly risky given the overextended swing in price.
We prefer to buy shares either on pullbacks (retracements) or on breakouts above key levels like the recent opportunity above $600.00.
The Weekly Chart reveals just how overextended shares are currently trading from weekly averages:
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Price is roughly trading 20% above the rising 20-week exponential moving average.
It’s just over $100.00 away from this key reference level.
Notice how price—especially in trends—tends to oscillate toward and away from this green average.
Again, selective caution is key here but Amazon continues to deliver strength to investors and swing traders.
By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com
