Don't Ignore This Chart!

Amazon's Negative Divergence Could Spell Trouble

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Amazon.com (AMZN) has been one of the strongest performers in 2016 and just recently broke out on a relative basis vs. the S&P 500 when it impressed Wall Street with its latest quarterly earnings results.  But there are now a couple warning signs that indicate AMZN may be at or near a short-term peak.  First, its lastest price high has occurred with a lower MACD reading, a sign of slowing momentum.  The MACD, however, does not take into account volume so I prefer to see volume slowing on the breakout to confirm the weak momentum.  That's exactly what's happening.  Check this out:


Volume has been steadily declining since the earnings-related breakout in late April.  AMZN is near overbought levels and a negative divergence has printed.  All of these are warning signs and it isn't helping that AMZN's five week SCTR stretch in the 90s broke.  I wouldn't be surprised to see an upcoming 50 day SMA test.

Happy trading!

Tom

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Tom Bowley
About the author: co-founded Invested Central in 2004 and served as the site's Chief Market Strategist for more than 10 years. Invested Central provides stock market education and guidance for those interested in making their own financial decisions. During his tenure at Invested Central, Tom co-hosted Market Open LIVE, a national radio broadcast that covered many of the largest markets across the U.S. In addition, he has spoken at various conferences throughout the United States and Canada and has taught thousands of traders across the globe how to trade equities more wisely with an emphasis on managing risk and intermarket relationships. Learn More
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