Trade of the Day: Is This the Time to Buy Amazon.com, Inc.?

Shares of Amazon.com, Inc. (NASDAQ:AMZN) soared about 7% in after-hours trading on Thursday after the company reported its latest batch of earnings that came in well above analyst forecasts. While I like AMZN stock into year-end, the question is whether this here now is the time to buy the stock right after the earnings report. Let’s have a look.

AMZN Stock: Is This the Time to buy Amazon.com, Inc.?

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There is no question about it, right now Amazon can hardly do anything wrong for investors, which is once again exemplified with Thursday’s after-hours reaction in the stock. And to be clear, I like AMZN stock for the longer term, which is to say that in my eye having a core long position in the stock makes sense … at least for the time being.

In fact, trying to “time” a stock like AMZN in this rampant of a bull market doesn’t make sense for the crowd of investors, but for the more active types this is where some alpha can be generated.

AMZN Stock Charts


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Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

On the multiyear weekly chart, we see that AMZN stock remains firmly within its steep multiyear up-trend as marked by the blue arrows. For risk management purposes, note that the lower end of this channel coincides with the yellow 50-week simple moving average.

From this perspective, assuming a next leg higher is now underway following the initially positive reaction to Thursday’s earnings report, the next upside target should once again become the upper end of this up-trending range. The upper end of this range currently is around the $1,200 – $1,250 area.


Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart, we see that while AMZN stock is in a rampant bull market year-to-date as well as on a multiyear time horizon, the stock has essentially been dead money since early June, when the broader large-cap tech stocks (if we want to label AMZN a tech stock) started to stall.

With Thursday’s after-hours surge of around 7% the stock is being firmly pushed out of this consolidation phase to the upside but also toward the spike highs from July. Those July highs were near-term trading highs that quickly got rejected.

While AMZN stock could stall for a little while at those July spike highs, barring any major reversal of the post-earnings rally we are thus far seeing, the stock now looks to be on its next leg higher back to the upper end of the aforementioned trading channel, i.e. toward the $1,200-$1,250 area.

Also not to forget is the pervasive  underperformance of fund managers, which will likely force them to chase names like AMZN stock higher into year-end.

Check out Anthony Mirhaydari’s Daily Market Outlook for Oct. 27.

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