Although the stock is more than $200 per share off its highs, Amazon (NASDAQ:AMZN) has been on fire in 2018. Despite the pullback, AMZN stock is still up 65% on the year and nearly 100% over the past 12 months.
It’s one thing to be a sub-$20 billion or $10 billion company and sport gains of more than 100%. But it’s an entirely different beast when the stock eclipses a market cap of $1 trillion — something AMZN did less than a month ago.
Many know the obvious impact Amazon has had on the retail market, given that we continue to see bankruptcies littered throughout the sector. Its e-commerce and Prime efforts have paid off, while investors have reaped monstrous rewards over virtually any time frame.
It’s made some investors wonder if AMZN stock still worth buying?
Sizing Up Amazon Stock
The company’s releasing a slew of new Alexa-connected home devices and will reportedly open thousands of its Amazon Go stores throughout the country.
There are two main takeaways from this news. The first is that Amazon is making a move into customers’ homes in a way that Apple (NASDAQ:AAPL) could have and should have years ago, but didn’t. Alexa can lock and unlock doors, start cars, turn on lights and do countless other things. Amazon’s acquisition of Ring gets it into the doorbell and camera businesses, while its Fire TV suite ushers in entertainment options and convenience.
Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) is also working on making advances in the home, but it doesn’t have the consumer e-commerce presence that Amazon has. Apple’s very good at the things that it does, but at times it lacks aggressiveness into new areas of opportunities.
From the looks of things, Amazon will likely win the battle for the home, given its commitment to various products, its e-commerce presence and relationship with millions of customers and its ever-growing ecosystem. That’s where the second takeaway folds into the Amazon Go stores. Prime was never about free shipping or watching TV or storing photos. It’s about getting millions of people to make Amazon their go-to source. Whether that’s buying pantry items or ordering video games or whether that’s sitting down on the couch to watch a movie or finding new music to listen to.
Adding these features aren’t meant to make money, they’re intended to broaden and strengthen the ecosystem, making it harder and harder to leave Amazon and Prime behind. Because guess what? No Prime equals no Amazon Go sales — another convenience factor for customers. It means having to contend with other competitors and losing a substantial piece of high-margin cash flow (Prime memberships).
Trading AMZN Stock
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There are other factors beyond Amazon’s e-commerce and Prime divisions. Consider that Amazon Web Services is the largest cloud provider. Some analysts have valued the unit at $600 million should AMZN break up. That alone would make it one of the largest companies in the world! That’s not including its massive advertising business or the retail segment we just discussed.
And for anyone that thinks the cloud is late-cycle growth, it’s anything but.
With that said, what do the charts say?
For all the good things going on with Amazon, AMZN stock is starting to look tired. The $1,900 level has been solid support (purple line), while uptrend support (black line) and the 50-day moving average have been support as well.
While AMZN is certainly a trend stock, those trends don’t last forever. For now, it’s holding up and as the market trades higher, it’s hard to bet against Amazon. In the short-term, it’s caught in a downtrend channel (blue lines). If the top line holds as resistance (No. 1), then it will threaten to crack those support levels and break the current trend.
If resistance gives way, it will propel Amazon stock over the 20-day and could lead to a retest of the highs. Aggressive traders can go long near current levels and look for that breakout, while conservative traders can wait for confirmation and go from there.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell was long GOOGL.
