Amazon stock chart showing "Breakout" rally ahead of earnings
Shares of Amazon.com Inc. rose Tuesday, enough to suggest a “breakout” technical rally ahead of the e-commerce giant’s earnings report after the close.
After a sharp climb off the March lows, as investors saw Amazon as a beneficiary of COVID-19-related lockdown measures, the stock had been consolidating within a narrowing range over the past several months.
That range, in the form of what many Wall Street chart watchers call a “pennant” pattern, is defined by a declining trendline at the top of the range and a rising trendline at the bottom. Many technicians see pennants as continuation patterns, meaning they tend to be resolved in the direction of the trend that preceded them.
For a break to be considered valid, it should be on a closing basis. Some traders apply a price (3% break) or time (sustained for 3 days) filter to confirm validity. The breakout should occur with an expansion in volume , especially on upside breakouts
After a sharp climb off the March lows, as investors saw Amazon as a beneficiary of COVID-19-related lockdown measures, the stock had been consolidating within a narrowing range over the past several months.
That range, in the form of what many Wall Street chart watchers call a “pennant” pattern, is defined by a declining trendline at the top of the range and a rising trendline at the bottom. Many technicians see pennants as continuation patterns, meaning they tend to be resolved in the direction of the trend that preceded them.
For a break to be considered valid, it should be on a closing basis. Some traders apply a price (3% break) or time (sustained for 3 days) filter to confirm validity. The breakout should occur with an expansion in volume , especially on upside breakouts
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False Breakout