Shares of Amazon.com, Inc. (NYSE:AMZN) may give back some of their recent gains.
On Monday, the stock climbed by more than $65, but it crashed into a wall of resistance when it reached levels around $3,400. This put an end to the move.
Resistance is a large group of sellers who are trying to get the same price for their shares; In this case, it’s $3,400. At resistance levels, there is more supply than demand for the stock. This is why rallies end when they hit them.
Shares reached this level on Feb. 2 and 3. The high trade on those two days was $3,434 and a big move lower followed. By early March, shares were trading around $3,000.
Amazon hit the resistance again on April 13 when the high trade was $3,432. Shares tested the resistance for the following week, but they didn’t make it through and a small sell-off followed.
Now Amazon has reached this important level again. There’s a chance that it trends lower like the last two times.
If shares can close above $3,400 and stay there for a few days, it will mean that the sellers who formed the resistance have finally completed their orders.
With this large overhang of stock out of the way, buyers will need to pay higher prices to acquire shares. This could result in Amazon making a rapid and large move higher.
Photo credit: Álvaro Ibáñez, via Wikimedia Commons