An 'ominous' pattern in Amazon's chart could catch Wall Street off guard

Amazon's stock price was red-hot during the first seven months of the year, gaining more than 40%. The run to more than $1050 a share briefly catapulted CEO Jeff Bezos into the position of richest person in the world.

But, shares topped out at the end of July, and have had trouble regaining momentum since then.

In a note to clients sent out on Monday morning, Gluskin Sheff's chief economist and strategist, David Rosenberg, noted that this latest struggle has Amazon's stock chart is a reason - for traders who rely on technical analysis - to worry.

"The chart pattern on Amazon is ominous having formed a textbook head and shoulders pattern," Rosenberg wrote.

Business Insider/Andy Kiersz/Jonathan Garber, data from Bloomberg

A head and shoulders chart suggests a level of support, and if the stock falls below that it could lead to a big drop.

It's called the neckline and in Amazon's case it sits at about $950 per share - and the stock fell below it Monday. The shares were trading at $940.51 as of 11 A.M.

Amazon shares topped out at $1,083 on July 27. The fall from the July high to the neckline was $133, suggesting Amazon shares could fall as far as $817 if the neckline is unable to hold.

Such a drop would catch Wall Street off guard. Currently, Bloomberg data shows 42 of 48 analysts covering the stock have a buy rating with an average price target of $1,151. The lone sell rating comes from Fintrust Investment Advisory Services' Allen Gillespie, who has a $640 price target.