Amazon (NASDAQ: AMZN) has recently shown a significant recovery after a sharp decline between July and August 2024.
Despite a significant decline from its yearly high of over $200, largely due to a general downturn in the stock market in early August, Amazon has staged a strong recovery in recent trading.
Over the past two weeks, the stock has posted its strongest performance since October 2023, marking a decisive recovery from the losses of previous months.
This recovery is particularly notable given the technical constellation of the stock, which now suggests further upside potential with a price target of $240.
When analyzing Amazon’s recent price development, the retail expert TradingShot highlights the importance of the stock adhering to a long-term uptrend channel, known as “Channel Up,” that has been in place for over 2.5 years.
Recent price movements and support levels
During the recent decline, Amazon’s price briefly fell below the 50-week moving average (1W MA50, blue trendline) for the first time since May 2023, which initially caused concern among investors.
However, the stock quickly reclaimed this level, underscoring its importance as a key support. In addition, the 200-week moving average (1W MA200, orange trendline) provided further support during this downturn, preventing an even steeper decline and maintaining the stock’s long-term bullish outlook.
Amazon is currently encountering crucial resistance at the 50-day average (1D MA50, red trend line).
Historically, a break of this level after a low has resulted in significant gains, with previous legs of this pattern producing gains of 79% and 69% respectively. The current resistance is the last hurdle before a confirmed breakout towards the $240 target.
Technical indicators of Amazon shares
The current Channel Up pattern is characterized by a series of higher lows and higher highs, indicating a continued uptrend.
Sine waves on the weekly chart clearly illustrate the cyclical nature of this pattern. Historically, Amazon stock has rallied strongly every time it touched the lower boundary of this channel.
Each time the price rose above the 50-day average (1D MA50, red trend line) after such a low (three times), it approached the top of the uptrend channel.
The current one-week RSI reading of around 50, below its moving average, suggests a neutral zone but is leaning towards a bullish scenario given the historical context.
In previous cycles, when the RSI was similarly positioned, the stock experienced significant upward movements.
When the stock price approaches the upper boundaries of the channel, the RSI usually rises, indicating stronger momentum. A rise in the RSI towards the overbought zone (above 70) could be accompanied by reaching the price target of $240.
Additionally, if Amazon successfully breaks the 50-day moving average (1D MA50), which has been generating high selling pressure this week, the stock is likely to continue its rise within the upper channel. The historical pattern suggests that the current uptrend could add about 59% from the breakout point, which is in line with the $240 target.
Given the current momentum and the cyclical nature of stock movements, Amazon is expected to reach the $240 target within three to six months, ideally by mid-2025. This is assuming stable market conditions and no significant external shocks that could slow the uptrend.
In summary, the $240 price target for Amazon is justified by the confluence of technical indicators, including the Channel Up pattern, RSI levels, and key moving averages.
The RSI’s current neutral position below its moving average suggests growth potential, while strong support at the 1W MA200 and potential breakout above the 1D MA50 offer a clear path to higher levels.
Investors should watch for a confirmed breakout above the 1D MA50 as this is a bullish signal that the stock is on track to reach the $240 target by early 2025.
Disclaimer: The content of this website does not constitute investment advice. Investments are speculative. When you invest, your capital is at risk.
