One of the most fascinating questions to ask is at which price exactly a stock is setting a major top, and preparing a major reversal. Our leading indicator to answer the above question is the deviation from the 90 week moving average (90 WMA).
Amazon, being one of the most beautiful long term momentum stocks, makes our point. The chart below shows how the 2003 and 2007 tops took place right at a time when the stock price was twice its 90 WMA. Moreover, that was confirmed by a double top formation.
Based on that insight, we do not see any of these conditions taking place currently. We would say that the “danger zone” is around the 850 to 900 price area. The exception would be a stock market crash, which seems unlikely at this point (but smart investors never exclude the bearish case though).
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