Shares of Amazon (NASDAQ:AMZN) finally look to have found a bottom after a brutal sell off. AMZN stock had fallen over 500 points, or 25%, over the past two months since making an all-time closing high of $2,039.51 on Sept. 4.
Certainly some of the carnage was due to AMZN getting a little too frothy as it neared $2,000. The recent selling, however, is getting overdone, especially given the dominance of Amazon in online retailing and AWS. Look for Amazon stock to head higher into the holiday season.
Cyber Monday marked the biggest shopping day in history for Amazon. The company reported over 180 million items purchased from Thanksgiving to Cyber Monday, far outpacing last year. Amazon also stated that small and medium businesses grew sales by 20% from the previous year.
These strong numbers will definitely help alleviate some of the angst investors felt following lowered holiday guidance following the latest earnings report. Online holiday shopping remains vibrant and Amazon continues to be the dominant player in that space.
InvestorPlace contributor Will Ashworth succinctly points out some additional benefits for Amazon during this shopping season that weren’t present last year: food and toys. The recent acquisition of Whole Foods is already reaping rewards, with Whole Foods reporting a record amount of turkeys sold for Thanksgiving. The bankruptcy of Toys R Us should provide a great opportunity for Amazon to take an even bigger piece of an already robust toy revenue pie.
Like it or not, AMZN continues to grab market share in nearly every new endeavor it undertakes.
Here’s What AMZN Has Going for It Now
Amazon stock trades as much on technicals as fundamentals, at least at this point. Shares once again reached an oversold reading below 30 on a nine-day RSI basis before strengthening and heading higher.
AMZN stock bounced sharply off major support at the $1,500 area after briefly trading below that critical juncture. This type of key reversal day is many times a signal that a major low may be in place, as the sellers may finally be exhausted. This is especially powerful following such a massive sell off and at such a crucial support level. I expect $1,500 to be a low for AMZN stock over the coming months.
Now that Amazon stock has dropped nearly 25% from the highs and held critical support, investors and traders should seriously consider adding AMZN to their holiday shopping list at a bargain price.
Tim Biggam may hold some of the aforementioned securities in one or more of his newsletters. Anyone interested in finding out more about Tim and his strategies can go to https://marketfy.com/item/options-and-volatility.
