Amazon.com, Inc. (NASDAQ:AMZN) stock is set to close 2015 by some 120% higher. And while AMZN is overbought through a six- to 12-month lens, for now, shares just continue to get bids.
The dynamic at work for Amazon stock at this time of year still very much remains one of performance chasing by underperforming fund managers, who are forced to bid higher any stocks that worked all year while dumping losers in places such as the energy sector.
With its doubling-plus, AMZN stock is very near the top of the performance chasing list, so it won’t lose its luster for the time being.
On the news front, Amazon.com (to no great surprise) continues to bask in a positive light while analysts keep hiking their expectations for AMZN. The longer-term story looks to be well intact, with drone delivery just one of the catalysts supporting the hopeful thesis. So I don’t see long-term bets against Amazon stock as a fruit-bearing call.
However, at the same time, through a six- to 12-month lens, the slope of AMZN shares is simply too steep to sustain. Thus, longer-term investors might find better deals on Amazon stock at some point next year.
It’s a simple fact of nature that gravity works, and that fact holds true for the stock market. When a slope gets too steep, and when an already steep slope goes vertical (as we’re seeing with AMZN stock), then the mean-reversion move tends to be violent.
Amazon Stock Charts
There is plenty of precedence in AMZN stock for this too, just note the 30% corrections in 2011 and again in 2014. Yet after a 120% straight shot to the moon in 2015, my Twitter feed is still screamingly bullish on Amazon stock in all time frames.
Don’t let the bulls fool you. Through a six- to 12-month time frame, there’s little reason to believe AMZN shares can’t see a 20% to 30% correction that takes it into the low to mid-$500s.
But concerning the here and now, AMZN shares still look ready for yet another push higher. The stock essentially has been in consolidation mode since November, and the one single-day scare Dec. 11 was quickly bought up.
On Monday, Amazon stock rallied and broke out of an ultra-narrow four-day trading range.
From a multiweek perspective, the stock is still consolidating, but a break above the $680 area may get the next leg higher toward the $720 area underway. Active investors could play Amazon stock accordingly while respecting any sharp bearish reversals.
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