Is Amazon (AMZN) Looking Ripe for a Potential Rebound? Here's What the Charts Suggest

Amazon (AMZN) has faced notable selling pressure recently, declining 8.8% over the past week. However, recent price action is revealing an interesting technical setup: a hammer candle formation appeared in the latest trading session. This pattern historically signals that sellers may be losing momentum, and buyers could be stepping in to establish support levels. Combined with improving earnings sentiment from Wall Street, the stock could be approaching a turnaround point worth monitoring.

Decoding the Hammer Pattern: How Traders Read This Setup

The hammer is a widely-watched candlestick pattern that tells a specific story about buying and selling behavior. Here’s what makes it distinctive: the day opens and closes near similar levels (creating a small body), but the stock trades significantly lower during the session before recovering (creating an extended lower tail). Think of it like a test of support—sellers push the price down, but buyers defend that level and pull it back up by day’s end.

When a hammer appears after a sustained decline, it suggests sellers have exhausted their ammunition. The fact that buyers managed to defend lower prices and close the day near opening levels hints that the selling pressure may be drying up. However, like any single technical signal, this pattern works best when confirmed by other bullish indicators and market conditions.

What’s Supporting the Bull Case for AMZN Right Now

On the fundamental side, Amazon has been experiencing something that typically precedes stock rallies: rising earnings expectations. Over the past month, Wall Street analysts have lifted their consensus EPS forecasts by 5%. This upward revision trend matters because research consistently shows that improving earnings outlooks tend to correlate with near-term stock price strength.

The upgrading of earnings estimates signals confidence among institutional analysts about Amazon’s ability to deliver better financial results than previously expected. When you combine this optimistic revisions trend with the technical signal from the hammer pattern, you get a potential two-sided confirmation of a bottom: technicals suggesting support found, and fundamentals hinting at coming strength.

The Bottom Line

Amazon’s recent weakness has created a setup that looks worth monitoring for reversal traders. The hammer pattern suggests oversold conditions could be reversing, while improving earnings forecasts add fundamental weight to the technical signal. Whether this marks a genuine turnaround will depend on how the stock performs in coming sessions—but the current setup is certainly ripe with potential for those seeking contrarian positions.