With aspirations to take over the world, Jeff Bezos has built Amazon (AMZN) into a true retail giant. I do not understand why Jeff needs to own the Washington Post too though. It sort of reminds me of an old James Bond movie where the villain simply controlled the media to issue his propaganda and start wars on his behalf.

My wife and I shop on AMZN first to find low prices and then see if we can find it lower. Usually Amazon has the lowest prices and is hard to beat, especially with their easy return policy.

I sold a drawing pad on Amazon (AMZN) over the summer using their retail store. I was able to recoup a significant portion of my purchase price, something that amazed me. It was one of those Intuis Pro drawing tablets. But I have found Adobe’s illustrator to be sufficient for my needs the last year or two.

Enough about my experiences, let’s start reviewing some charts.

Amazon (AMZN) – Upside Potential

First let’s look at Amazon (AMZN) and its upside potential for its share price. I will present 2 different bullish scenarios. The first one is the more conservative bullish outlook and the second is a more aggressive target.

Bullish Scenario #1

This is a 5 year weekly candlestick chart. Since AMZN’s share price did not break below the $696.44 level which appears to be the top of a Wave 1 in a large Bullish Impulse wave pattern, it’s share price should rally up to new all-time highs once again.

Look for confirmation from the MACD Histogram. It should start showing improvement by the end of the week and a slow down in selling momentum next week as its share price starts to rebound.

Analyzing Upside Potential Using Fibonacci Tools & Applying Elliott Wave Analysis

This scenario depends upon AMZN’s share price staying above the $696.44 during any pullbacks in the next 2-3 weeks. The upside target for this price scenario is $900 – $925. At that level, you would start fading the trade (scaling out of a few shares at a time) in anticipation of a pullback to the trendline.

The $900 – $925 level suggests the end of a possible longer trend and a consolidation period that may last up to a year.

Bullish Scenario #2

This scenario requires the following price action for AMZN over the next couple of weeks. I would first anticipate that yesterday’s low of $710.10 is the low of the pullback. Amazon’s share price is going higher, and probably at a rapid clip back to re-test its previous high which it should then break through on heavy buying volume.

Extremely Bullish Price Projections for Amazon (AMZN)

The $1000 area is probably the next major resistance area on its way up. This would be the move over the next 6 months approximately. Amazon should then find support on a pullback from $1000 around the $900 area.

Expect the move from $900 to $1100 to happen in the blink of an eye. Fading shares at the $1150 area would complete the bulk of the trade.

Here is the twist with this scenario – it could drop below the $696.44 area back towards the trendline and then start its massive run. From a technical perspective, this would not break any of the rules and makes for a tricky analysis.

This is the most aggressive I can get with the Fibonacci Extension Tool on this chart. AMZN would have to kill it on all levels in my opinion for this scenario to play out. But one thing I’ve learned over a decade is to never fully discount any possibility as long as it still remains statistically possible. The market just loves to do “that”.

Amazon (AMZN) – Downside Risk

Now let’s look at the downside risk for Amazon (AMZN) and its share price if any attempted rebound over the next couple of weeks fails to gain traction and momentum.

First off, this is a 5 year monthly candlestick chart for AMZN. The above charts were weekly charts. AMZN’s share price formed a bearish reversal candlestick pattern last month on selling volume that was greater than the previous month’s volume, a bearish sign.

A Dark Cloud Cover Candlestick Pattern Developed on AMZN’s Monthly Chart in October 2016

A bearish reversal candlestick confirmed by volume means that the end of the trend is at hand or is near. That is, until the resistance area is broken and closed above. If AMZN does not close out the month at $780 or higher, the probability of a 3 Black Crows candlestick pattern is greatly increased. A failure to close at that level would then most likely happen with increasing selling volume by the end of the month. That would be a definite bearish signal.

A 3 Black Crows candlestick pattern would most likely push AMZN’s share price back towards the trendline before any significant rebound in its share price. The trendline touch would be around the $650 area.

Amazon (AMZN) – Moving Averages

AMZN’s share price is on the wrong side of all its moving averages except its 200 Day average. It actually stopped just short of the 200 Day average before yesterday’s and today’s rebound. The 200 Day average sits around the $700 area.

Using Moving Averages and a Fibonacci Retracement Tool to Look for Support Areas

Any shares bought at this level, which was almost a 38.2% Retracement of the recent uptrend, could be held until a possible rebound to the 50 Day moving average. Longer-term investors should wait for a touch or a quick break below the 200 Day moving average before looking to go long. That would provide a better risk to reward ratio as long as the break below the average is quick and for no “apparent” reason.

Amazon (AMZN) – Summary

If AMZN’s share price can finish out the week strong, it may offer a trading opportunity at a minimum. Sometimes those trading opportunities can lead to larger things, but only time will tell. A 10% minimum gain on purchasing at today’s closing price would be expected. AMZN could then go on and proceed in the manner I describe in bullish scenario #1.

If AMZN is an interesting stock to you as a longer-term investment, wait to see what this week’s candlestick pattern is going to look like. That will provide a better indicator than relying on its daily chart at this time. Look to see if AMZN can develop a bullish reversal candlestick pattern by the end of this week. If it can, that will provide confirmation of a support area and allow for a small scale-in purchase to go long.

The development of a Dark Cloud Cover candlestick pattern on its monthly chart definitely warrants caution. Usually you want a 1:3 risk to reward ratio when looking for longer-term investments. With support around $650 and upside potential of $1,000, that is a little less than the preferred 1:3 ratio.