Two months ago, we showed you how in December 2022, Elliott Wave analysis helped us to predict and take advantage of Amazon‘s 2023 rally. The stock is up 65% year-to-date and we’re happy to have pocketed most of those gains. Now, with Amazon (NASDAQ:AMZN) approaching new yearly highs and Wall Street already betting on 2024 rate cuts, it is time to take a fresh look. Is AMZN still 'a buy’ above $140?
According to the 4-hour chart above, it most likely isn’t. It reveals that the recovery from $81.43 has evolved into an almost complete five-wave impulse. We’ve marked the pattern 1-2-3-4-5, where the five sub-waves of wave 3 are visible, as well. Wave ‘i’ of 3 is a leading diagonal, while wave ‘iv’ is a triangle correction.
The September-October pullback fits in the position of wave 4. Note that it didn’t touch the top of wave 1, just as the Elliott Wave theory postulates. If this count is correct, the current rally fueled by the company’s Q3 earnings report, must be the fifth and final wave of the pattern. Wave 5 is supposed to exceed the top of wave 3, thus putting targets near $150 a share within the bulls’ reach.
Unfortunately for them, at that point the pattern would be complete and a notable three-wave retracement should follow. Corrections usually erase the entire fifth wave, which translates into a drop back to the support under $120 in wave (B). That’ll be a 20% pullback before the uptrend can resume in wave (C). So, while Amazon is undoubtedly one of the strongest businesses ever created, its short-term stock price performance is likely to underwhelm.