Don't Ignore This Chart!

Amazon's Negative Divergence Could Spell Trouble

Tom Bowley

Tom Bowley

Chief Market Strategist, EarningsBeats.com

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 of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More