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

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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