Amazon.com, Inc. (NASDAQ:AMZN) was spurred by a record-shattering Prime Day on Wednesday, with AMZN stock jumping more than 1% to reclaim the magical $1,000 mark. The retail killer set a new single-day sales record, surpassing its previous record set during last year’s Prime Day.
And it wasn’t just Amazon shares feeling the good vibes yesterday. Tech stocks across the board were uppity all day long. The Nasdaq’s 1.19% gain outpaced both the S&P 500 and the Russell 2000, which rallied 0.75% and 0.77%, respectively.
Yesterday’s jump has done wonders in healing the damage inflicted during last month’s tech wreck. In fact, of the infamous FAANG gang, Apple Inc. (NASDAQ:AAPL) is now the only one still below its 50-day moving average. The rest are on the mend, with Facebook Inc (NASDAQ:FB) leading charge.
But since I already highlighted Facebook’s dominance yesterday, it’s time to turn the spotlight to AMZN stock.
Amazon’s Charts
In Amazon’s weekly chart, the volatility of the past month appears a mere blip on the radar.
For starters, it was altogether justified given the stock’s overbought status heading into June. And the silver lining of all the backing and filling is it has allowed the stock to work through its overbought conditions.
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The 20-week moving average has played catch-up, and the stock has formed a seven-week base. It actually wouldn’t be bad if AMZN stock based a few more weeks before breaking out, but given Wednesday’s giddiness, perhaps that’s asking too much.
Also, notice how the Relative Strength Index (RSI) indicator remained near its highs during the entire corrective episode. That’s positive and reinforces the bullish undertones in the stock.
Finally, the volume patterns were noticeably neutral over the past month. Unlike the last two major downturns which were littered with distribution days, the participation was much more subdued this go around.
In drilling down to the daily chart, one thing becomes apparent: The $1,000 line isn’t all that significant. It’s a nice whole round number, sure. And it likely does hold a fair bit of psychological influence with the masses.
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But as far as support and resistance go, the $1,015 level is the threshold to watch. That area is where bears are camped. The past three advances have been halted there, dead in their tracks.
While a pop above $1,000 is interesting, it’s breaking $1,015 that will signal a bona fide breakout.
The Breakout in AMZN Stock
With the stock up about $55 over the past week and overhead resistance looming large now is not the time to pull the trigger. I’d rather wait to see if we can successfully take out $1,015 first.
I’m not sure I’d short here either, though. Sellers had every chance in the world to press their advantage in the tech space over the past week, and they didn’t. Their timidness is a buzzkill to my inner bear.
Furthermore, there are better big-cap stocks to play to the short side. Apple is the worst-looking of the bunch, so if you’re looking to focus on the weaklings, that’s your stock. And if you’re looking to fade strength (i.e., go bearish on an overbought stock), then Facebook is even more stretched than AMZN, so that’s the better play.
Tack on the fact that Amazon has its earnings release scheduled for July 27, which shortens its tradable window, and I find many more reasons to pass on AMZN stock here than play.
If I had to trade it, I’d wait for an upside breakout and sell out-of-the-money bull put spreads.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities. Want to learn how to master the art of option selling for high-probability cash flow? Check out the replay of Tyler’s recent webinar on how to systematically sell Iron Condors for monthly income.
