Amazon looking at the Abyss

Published on Thursday, 14 January 2010 12:11 Written by Danny Miller

New York, Jan 14^th (TradersHuddle.com) – Shares of Amazon.com (NASDAQ:AMZN) continue to be under pressure this morning, as the stock hasn’t been able to shake off the onslaught of profit taking.

Amazon shares have been down 10 of the last 13 days, severely underperforming the S&P 500 in the first 2 weeks of 2010.

The chart formation in Amazon is not encouraging as the stock was not able to get above its previous all time high, and now is struggling to hold support. Although Amazon stock price dipped below the $130 level, traders are looking at $125 as their point of reference, given that this is the level from where Amazon was able to bounce back.

With today’s price action Amazon is below $130 once again, traders are eyeing the $125 level to see if support holds. Given the ongoing weakness in the stock, it might be overdue for a bounce; this could materialize if buyers come in at the $125 area.

If the $125 level fails the stock get hit with more selling as technical traders will be forced to sell given their stop losses will be hit accelerating the fall towards the $110s, basically booking a full roundtrip from where is started after beating estimates.

The 20 day moving average in Amazon’s chart is starting to turn bearish as well, given that is developing a negative slope. However, the fundamentals in the stock should translate into a good technical pattern once the profit taking subsides, which in turn will provide traders with another good opportunity to enter this stock.