AMZN Stock: A Bull Market Still in Development
The markets are currently skittish and a violent move in the indices could erupt at any moment. There are a number of factors currently giving investors angst, which is causing this skittish environment. These factors all stem from investors trying to come to grips with rising interest rates, a fallout from a trade war, and tensions in the Middle East.
Any of these factors is enough to send the markets tumbling. This trifecta leaves me wondering how the markets are even staying afloat at their current levels. The simplest answer is usually the correct one, so why not just assume that the reason why the markets haven’t suffered further losses is because a bull market is still in development?
I have found a silver lining in this bull market and it is the Russell 2000 index. The Russell 2000 index is a small-cap index and it has just accomplished an extraordinary feat. The Russell 2000 index has recently gone on to make a new all-time high.
If the small-cap index is forging new highs in this skittish market, it means that money is still flowing into stocks and speculation is still running rampant. This bodes well for the health of the market, reinforcing the assumption that a bull market is still in development.
Sticking with the theme of a bull market in development, I am focusing on Amazon.com, Inc. (NASDAQ:AMZN) stock because I believe we haven’t yet seen the peak in the Amazon stock price as its bull market is still in development.
These beliefs are based on a couple of technical indications on the verge of being generated. When they are generated, they will reaffirm the notion that AMZN stock is embarking on the next leg of its bull market.
The first indication is a technical price pattern currently in development. This work in progress is highlighted on the following Amazon stock chart.
Chart courtesy of StockCharts.com
This AMZN stock chart illustrates that the technical price pattern currently in development is a cup-and-handle price pattern.
Cup-and-handle price patterns are created because a significant level of price resistance has prevented the stock price from advancing beyond it. This inability to move beyond a price point and make any headway results in the development of two distinct troughs. The first trough is always bigger than the second, and these troughs are what characterize and define this pattern.
This significant level of price resistance currently resides at $1,645, which would also mark a new all-time high for Amazon stock.
When this price point is breached, it will complete the pattern, suggesting that further gains are likely to follow. This signal created by the completed price pattern will likely coincide with the signal generated by the influential momentum indicator, which is highlighted on the following Amazon stock chart.
Chart courtesy of StockCharts.com
In order to stage a sustained move in a stock’s price, the applicable momentum is required. Luckily, there is an indicator that has the ability to distinguish whether bullish or bearish momentum is influencing the price action in a stock.
This indicator is the moving average convergence/divergence (MACD) indicator, and it is a very influential indicator that I have become very familiar with.
In order to distinguish between bullish and bearish momentum, the MACD indicator uses the crossing of a signal line. A bullish MACD cross implies that bullish momentum is influencing the price action, creating a path of least resistance geared toward higher stock prices. A bearish MACD cross implies that bearish momentum is influencing the price action, creating a path of least resistance geared toward lower prices.
These signals have been spot-on in correctly suggesting which direction Amazon stock was heading in next. Each and every bullish MACD cross correctly implied that a progressive move toward higher AMZN stock prices was in development. Each and every bearish MACD cross implied that a brief move toward lower AMZN stock price was in development.
The MACD indicator clearly has the ability to imply whether Amazon stock is set to advance or pull back. That is why I never take this indicator for granted. The signal lines that create this indicator are currently converging, and the appreciation in price required to complete the cup-and-handle price pattern will also generate a bullish MACD cross.
The combination of these technical indicators is enough to assume that once they are generated that AMZN stock is embarking on the next leg of its bull market.
A couple of technical indications are on the verge of being generated on the AMZN stock chart. Once these technical indicators are generated, I will have to assume that Amazon stock has embarked on its next leg toward higher prices.