Shares of Amazon.com, Inc. (NASDAQ:AMZN) rallied over the past few sessions along with the broader market off immediate-term oversold levels one week ago. While the company remains a stellar growth engine, AMZN stock particularly on the weekly chart seems to signal further choppiness ahead.
Dedicated readers of this column know of my multi-time-frame approach to trading and investing and in that vein it is important to reiterate at this juncture that just because one likes a stock for the longer term does not mean one has to buy it at any price and point from a trading perspective. Likewise, just because one may like a particular trading setup in a stock does not mean it has to be a great longer term holding.
When I last offered my take on AMZN stock on Jan. 30 in this here column I said that the stock’s chart had gone parabolic and that following the earnings report there could be a bearish trade setting up toward “a first downside target near $1,300.” Seven and a half trading sessions later, this downside target was reached for quick and juicy profits.
AMZN Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
Despite the gyrations in the stock over the past two weeks, through the longer term lens in my eye it remains notably overbought.
The bulls will point to the fact that the recent dip in the stock got it to re-test the upper end of the channel (green dotted parallels) while bears note that from most weekly momentum angles as well as the MACD oscillator at the bottom of the chart, AMZN stock remains plenty overbought.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart we see that as a result of the pullback I called for on January 30th AMZN stock retested its yellow 50 day simple moving average and the daily momentum oscillators took a much needed breather.
Although it cannot be ruled out that the stock from here shoots to fresh all time highs, given the lengths of the weekly candles on the above chart, coupled with the still very overbought momentum readings on the same charts, I prefer not to chase the stock higher here from a trading perspective for I see more backing and filling ahead for now.
Traders that bought AMZN stock into last week’s dip in my eye have a good opportunity to take some short term profits here.
Check out Anthony Mirhaydari’s Daily Market Outlook for Feb. 16.
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