Make or Break Time for Amazon.com (AMZN) Stock
Yes, the markets are a shambles right now, and even top-performing stocks are not performing well anymore. But all bad things (along with bad corrections and bad bear markets) come to an end at some point. The hard part lies in trying to time that end. But what we can do while we’re waiting is: choose our stocks carefully. Find stocks that will likely be in the best position to outperform once the market slaughter is over. For us, one of the best choices at this point is our old standby, Amazon.com (AMZN) stock.
This year may have seen the fall of the FAANGs as high-flying market darlings. But Amazon.com has held up relatively well under the circumstances. What are these circumstances? All you need to do is look to see the S&P 500 down around 16% and Dow around 15% below latest highs, both deep in correction territory. The Nasdaq Composite is even worse, dipping into bear market territory on Thursday at around 20% below its recent highs. Then, look at the retail sector (which Amazon has been accused of killing) – the SPDR S&P Retail ETF (XRT) is down around 24% from its August peak and down more than 11% year to date.
Amazon Stock Relatively Resilient
Now, contrast all of that with Amazon.com’s stock. Sure, AMZN is down a whopping 28% from its September high. But year to date (as of Thursday’s close), the stock is still up nearly 25%. The current holiday buying season may have helped Amazon with its fourth quarter revenue and earnings, though we won’t know until the company’s next earnings release in February. But an earnings beat wouldn’t be a surprise, as that’s lately been the rule rather than the exception for Amazon.
As for the technicals, charts are showing some patterns that could translate into big gains for the stock if the overall market can recover some of its lost dignity. The daily chart of AMZN is showing the tentative formation of an inverse head-and-shoulders pattern, which is considered a bullish indication. That is, it’s bullish if the chart doesn’t first break down below the low of the head, which is right at $1420. The $1420 area is also major support for the stock, so if price manages to stay above that level, all is likely to be just fine. Momentum indicators like Stochastics are also well in oversold territory and beginning to point back up. This suggests an exhaustion of the previous downside momentum.
If the overall market doesn’t get too much worse, Amazon could be one of the first major stocks to rally significantly off its lows.
The Technicals Rating
The Technicals gives AMZN a bullish rating of 6 (on a scale of 1-10, with ’10’ being the most bullish and ‘1’ being the most bearish). Below are some of the key technicals for AMZN, as well as other relevant information, that help paint a slightly bullish picture of the stock:
- Price Position vs 200-Day SMA: -14.33% (below) – BEARISH
- Position vs 50-Day SMA: -12.07% (below) – BEARISH
- Position vs 20-Day SMA: -9.41% (below) – BEARISH
- 200-Day Trend Slope (Linear Regression): BULLISH
- 100-Day Trend Slope (Linear Regression): BEARISH
- Stochastics (14,3,3) Level: Oversold – BULLISH
- RSI (14) Level: Near Oversold – BULLISH
- Position in Bollinger Bands: At Lower Band – BULLISH
- Sector (ETF: XLY) Long-Term 200-Day Trend: BULLISH
- Sector (ETF: XLY) Medium-Term 100-Day Trend: BEARISH
- Market (S&P 500) Long-Term 200-Day Trend: BULLISH
- Market (S&P 500) Medium-Term 100-Day Trend: BEARISH
- Short Interest Ratio: 1.37% – BULLISH
- Analysts’ Mean Target Price: $2136.26 (way above current price) – BULLISH
- Last Earnings Reaction: Sharp Gap Down – BEARISH
Overall The Technicals Rating for AMZN: TTTTTTTTTT (6 out of 10) – SLIGHTLY BULLISH
IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.
Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don