Amazon.com Inc’s (NASDAQ:AMZN) shares rose 1.5% when the S&P 500 dropped by 0.7% on Wednesday, amidst investor worries over the debt ceiling and a potential interest rate hike by the Federal Reserve. The boost is attributed to the bullish pattern Amazon formed, known as a “bull flag,” from May 15.
A bull flag consists of a sharp price rise known as the pole, followed by a consolidation pattern in which the stock’s value is reduced, creating a channel between parallel lines or a tightening triangle.
- Bearish traders may short the stock at the upper trendline and exit at the lower trendline while aggressive traders anticipate the continued downward trend in the channel; Bullish traders can secure their entry when the stock breaks up from the upper descending trendline of the flag on a large trading volume, as the stock’s measured move upward is equal to the length of the pole added to the flag’s lowest price.
The bullish pattern could extend up to the $123.50 mark, which implies approximately an 8.5% increase from Amazon’s current share price. To validate the pattern, traders should look for Amazon’s stock to break up from the top descending trendline on a large trading volume, while bearish traders anticipate the stock falling below the lower trendline with higher-than-average trading volume, indicating the negation of the bull flag.
Additionally, Amazon’s stock is currently on an uptrend following the formation of higher highs and higher lows, with resistance at $117.16 and $125.93 and support at $109.30 and $99.88.
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