Has the market gotten ahead of itself in the short-term? Now, maybe more than ever, that’s a distinct possibility. But for investors searching for critical leadership off and on the price chart in the months ahead, mega-cap Amazon (NASDAQ:AMZN) stock remains a 973-pound gorilla making all the right moves. Let me explain.
Undoubtedly, the past week has been a breath of fresh air for an ill stock market struck down by the coronavirus. The large-cap S&P 500 and tech-heavy NASDAQ Composite have each rallied a bit more than 20% since last Monday’s history-making bear market low. At the same time, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), the world’s two largest publicly-traded companies, have gone along for the ride in lockstep. Those are welcome signs to be sure.
The million, or more aptly, the trillion dollar question based on market caps, is whether the broader averages have actually bottomed? If they have, 2020’s bear market would prove the shortest on record. That could be a red flag. Still, in today’s algo-driven, high-frequency traded environment, I’m not against the possibility of a new benchmark being set.
The fact is, this is not your granddad’s stock market. Prior to the internet, the only Amazon of importance was far-removed from Wall Street and not a company obsessively tracked by investors due to its relevance in today’s world. But some things from days gone by do remain critical for the health of the market and for Amazon stock. One of these key elements is the follow-through day, or FTD.
There Is Time for an FTD to Emerge
So far, this technical-based combination of a high-powered rally accompanied by increased volume off last Monday’s low has failed to make an appearance. The signal is important for one reason only. No major market bottom has occurred without a follow-through day in place.
The good news is there’s still time for a FTD to emerge. Most often a signal occurs in a window of four to seven sessions after a corrective low has formed. Tuesday marks day six, but the count isn’t set in stone. A late signal by a couple days shouldn’t be ignored, especially if leadership elsewhere in the market is apparent. And it is. Just look at Zoom Communications (NASDAQ:ZM), Domino’s Pizza (NYSE:DPZ) or DocuSign (NASDAQ:DOCU). Or take a break from your shopping cart on Amazon.com and look at Amazon stock.
In this coronavirus-driven market, Amazon’s importance has stuck out like a sore thumb for many Americans having to shelter-in. What’s more, the tech giant’s bearing has also importantly stood out on the Amazon stock chart.
Amazon Stock Monthly Price Chart
Source: Charts by TradingView
Since the COVID-19 pandemic began to make its impact on U.S. financial markets, Amazon stock has swung higher and lower with the major averages. In that respect the price action hasn’t been unlike peers Apple or shares of Microsoft. But what differentiates this $973 billion market gorilla is its longer-term monthly price chart.
Over this same period Amazon stock has managed to test its long-term uptrend. In of itself, it’s a positive sign. What makes the challenge even more attractive is it follows 1.5 years of corrective consolidation work which formed two failed, but overall healthy-looking basing patterns. The provided monthly chart represents this as back-to-back cup-shaped bases.
So, what more could AMZN investors ask for? Given a supportive-looking stochastics set-up and nearly completed hammer candlestick, not much in our opinion. Well, other than a follow-through day, which should sound the alarm for investors to go from the shopping cart to making an actual purchase of Amazon stock with greater authority and chance for success.
Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.