Amazon stock has more than doubled from its early-2023 bottom. As a member of the Magnificent Seven, the company has been among those leading the charge ever since the recession fears of 2022 turned into fear of missing out on the AI revolution. And now that the Fed has officially began cutting interest rates, being a bear is getting even harder.
But if a mere recession scare could cause a 57% crash in the stock price of Amazon in 2022, what would a real one do? Answering this question is not the topic of this article, though. Only time will tell. What we’d like to focus on instead is the Elliott Wave structure of Amazon ‘s recovery from that January, 2023, low.
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The uptrend from the bottom at $81.44 can be seen as an almost complete five-wave impulse pattern. We’ve labeled it (1)-(2)-(3)-(4)-(5), where the five sub-waves of wave (3) are also visible. The market also took into account the guideline of alternation since wave 2 of (3) is a sharp a-b-c zigzag, while wave 4 is an a-b-c-d-e triangle correction.
Wave (4) ended shortly after touching the 38.2% Fibonacci retracement level. This supports the idea that the current upswing is part of the fifth and final wave of the pattern. Wave (5) is supposed to exceed the top of wave (3), putting upside targets north of $201 within the bulls’ reach. It appears we’re somewhere near the middle of wave (5), so it shouldn’t come as a surprise if Amazon stock approaches the $220 mark.
Once there, however, the impulsive structure would be complete and, according to the theory, a three-wave correction should follow. The corrective phase of the cycle usually erases the entire fifth wave, which translates into a decline back to the area near $150 a share. In case a recession really does take place, the anticipated retracement might turn out to be much deeper than that. So instead of celebrating the new record, we think Amazon investors would be wise to take some chips off the table.
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