Earlier this month, I mused that “Amazon Should Make a Run to $300.” Six full days later, Amazon (AMZN) has indeed hit (and exceeded) my $300 price target … and now it’s time to revisit the charts, especially considering the 8.3% rally since then has pushed AMZN into overextended territory.
The first chart I showed on July 3 was similar to the one below, although a little longer in time frame. The stock kept pulling back to its 2012 support line, which eventually was enough to push it to fresh all-time highs during the past two weeks.
If we look at the recent steepness of Amazon’s slope and note how far it is extended from the 2012 uptrend, chasing the long side here seems difficult at best.
The daily chart of AMZN shows the powerful breakout much clearer. Note that after a retest of the red breakout level on June 24, the stock had done all it needed to qualify for a powerful upward surge. Also see how the 50-, 100- and 200-day simple moving averages were closely bunched together, which helped to coil up the stock for the move higher.
Momentum oscillators such as the stochastics, the RSI (relative strength index) and even the McClellan indicator for Amazon stock are all in seriously overbought territory at this stage, to no great surprise. What is missing, however — and something I like to see before flipping medium-term bearish on a name — is negative divergence between momentum and price. This is missing both on the daily and weekly charts.
In other words, meaningful tops often develop when upside momentum fades but the stock continues to climb. AMZN, however, keeps climbing as momentum also climbs.
In summary, while Amazon’s rally over the past two weeks has been steep and while AMZN is immediate-term overbought, on the longer time frames of three to six months, the stock still looks to have some upside left — at least until that momentum negatively diverges from price.