Update on AMZN, WFC & INTC

10 days ago or so, I posted on Amazon and Wells Fargo, and last weekend I posted a longer article on Intel.  Today I want to take just a few minutes to revisit and recap what has happened since those initial posts.

Starting with Amazon, last time I provided a chart showing how price had been consolidating within a narrow range, and pointed out how low the ADX was getting.  Taken together, a pretty good sign that a larger move is coming.  In today's slide (as of Friday's close) we see that Amazon has now broken out of its range, going from 125 to 138/139 in just three days. 

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Now that the consolidation pattern has resolved itself to the upside, I would expect to see this trade higher and at least test the previous highs at 150.  If not already long, I would wait for a slight pullback to get a better entry.  The 135 area should provide some support here. 

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On Wells Fargo, last time we were looking at a head and shoulders pattern, where price had already cracked the neckline by a significant amount, indicative of much lower prices to come, but first, I was looking for a small reversal, and perhaps a back test of the neckline before heading back down.


Over the past week, we did get a reversal, and on Thursday's close, a re-test of the neckline....all somewhat according to plan.  Then on Friday, we saw a pretty big gap-up across almost the entire market, due to the employment numbers being "less bad" than expected.  WFC gapped up with the market, getting back over the neckline, but didn't do much else. 

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Now we're sitting in no-man's land, and it's difficult to say what comes next.  The problem right now, is that we have an extremely high correlation across almost all stocks and sectors....I think I read somewhere that over the past 3 days, correlation has now reached 80%, meaning that 80% of all stocks in the market are moving in tandem in the same direction.  Why this is problematic is because it makes trading on technical signals almost impossible.  From a technical standpoint, last week WFC was looking very weak and ready to fall, but with correlation being as high as it is, WFC has risen on the coat tails of the overall market, and could continue to do so.  That all being said, I don't really have a recommendation at this point for WFC, other than to say that I'll be watching the financial sector in general over the coming weeks.  Financials have been getting pounded pretty good over the past months, so a rebound in this sector may be on the horizon. 

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Moving on to Intel, at the end of my rather long post last weekend, I speculated that it was due a bounce, and could get back up to resistance at 19, followed by gap fill resistance at 19.50. 

As can be seen in the chart below, while Intel did get a bounce, along with the rest of the market, it looks pretty weak compared to the moves we saw across the broader markets, or even compared to Amazon and Wells above.  Also note that 19 represents a H&S neckline for Intel, which unlike Wells, wasn't re-tested nor broken during the past three day's move.

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Someone posted a comment a few days ago that the chip sector is a good place to go long now.  Based on the relative weakness seen here with Intel, not to mention the fact that they've lowered Q3 guidance, I would be cautious about getting too bullish on chip sector stocks for more than a day-trade or short term swing.  I would wait on the retail sales numbers coming out later this month, as it captures back-to-school spending in August.  This should show us what the demand for PC's and laptops was.  If this was a strong number, I would be more inclined to go long, but right now, it's not looking too appealing.