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Run Alongside the Amazon (AMZN) Bulls

AMZN has a lot to offer traders but don't overlook the importance of a stop-loss


I want to start by saying that I love (NASDAQ:AMZN), the company. The online seller of books, both the old-fashioned variety and its Kindle eBooks, and virtually everything else, is perhaps the greatest advent in retailing ever.

I also admit that I love the stock. For long-term investors, it’s the kind of stock that has delivered—and that will likely continue to deliver—incredible upside. In fact, over the past five years, AMZN shares are up 227%.

For traders, the bullish milieu for AMZN has been fantastic, and if you believe the analysts, it’s likely to get even better.

On Wednesday, a bevy of firms that follow the stock lifted their respective price targets on AMZN. Daniel Kurnos, an analyst at Benchmark Co., increased his price target on AMZN to $310 from $260. In his note to clients, sent on Wednesday, Kurnos wrote that the company’s new Kindle tablet models for the U.S. and Europe have “leveraged the development of the international mobile app portal,” and that, he says, could boost fiscal Q3 and 2013 sales.

Dow component Bank of America (NYSE:BAC) also increased its price target on AMZN to $300 from $274. The same day, Wall Street darling firm Goldman Sachs (NYSE:GS) finally initiated coverage on AMZN shares, setting a “buy rating” on the stock with an accompanying price target of $315.

In its note to clients, Goldman wrote, “We believe ecommerce growth, driven by shrinking traditional retail footprints and favorable consumer demographics, and AMZN’s share of it, should continue to exceed expectations.”

If Goldman is right, then a $315 price target represents an 18.7% spike from Thursday’s closing value of $265.34. I think that traders have a lot of upside in AMZN shares during the next several months, and I think we could see the shares surge to about $290 by the end of the first quarter. This represents a 9.2% gain during the next two-plus months. And, if you believe the bullish prognostications, my $290 target is just the beginning.

Note: Whenever I buy a stock, I always set a stop-loss anywhere between 8%-10% below my official buy price. Doing so will ensure you never take a big loss in any one position. Remember, a big trading loss is hard to recover from; however, small trading losses can be easily digested.

At the time of publication, Jim Woods was long AMZN.

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