The pullback in stocks so far in August has been a sinking tide that’s taken down many a boat. Even the best of the best have succumbed to selling pressure, including online retailing stalwart Amazon.com (AMZN).
Since its July 26 high just north of $312, AMZN shares have shaved off about 8.8%, closing Wednesday at $284.57. That’s certainly no small drop, especially in less than a month. Moreover, AMZN also just broke below its 50-day moving average, which technically speaking doesn’t augur well for its short-term prospects.
Click to Enlarge Yet if we examine a 12 month price chart of the game-changing retailer’s shares, we see that dipping below the 50-day moving average is familiar territory for the Jeff Bezos-led seller of just about everything you could ever want.
As you can see, the stock dove below, and subsequently rose sharply above, its 50-day moving average eight times over the past year on its way to gains of more than 19%. I suspect that the latest dip below the 50-day will result in another big swing back to new highs, especially once the market gets over the so-called “Septaper” jitters.
For traders who like to take advantage of market-induced pullbacks that have little to do with the fundamentals of great companies, then AMZN is one you should consider buying during this August dip.
Absolutely nothing has changed for Amazon since it made that new high in July. The only thing that’s changed is that rising interest rates induced by Fed tapering fears have caused stocks and bonds to stumble. Once those fears have been dealt with, I suspect traders will look fondly at that chance to pick up AMZN in the mid-$280s.
At the time of publication, Jim Woods had no positions in any of the securities mentioned.