Good Time to lock In some gains with AMZN
Report Done on April 18th
Amazon has had a very strong run in recent months and one of the few stocks that has been able to weather the COVID 19 storm, but based on a technical analysis point of view it might be time to take some profit as the stock looks like its overbought.
The Relative Strength Indicator (RSI) is a specific indicator that is used to detect if a stock is over sold or over bought. The RSI is calculated using average price gains and losses over a given period of time. The default time period is 14 periods with values bounded from 0 to 100. A reading of above 70 means the stock is overbought highlighting a bearish signal that the stock might fall in price. This is the case with Amazons stock in the purple line graph above showing a RSI reading of above 70 signally a short term fall in Amazons stock price.
The Bollinger bands are an additional indicator used in technical analysis to detect volatility if the bands are close together then there is considered to be low volatility however if the bands widen then there is considered to be high levels of volatility. Also it is very uncommon for a stock to move outside the Bollinger bands if it does it more often then not will swift move back inside the Bollinger band. As highlighted in the Graph above with Amazon we can see a move outside the Bollinger band and a widening of the Bollinger band indicating higher volatility and a possible decline in price to fall back inside the Bollinger band.