Amazon.com (AMZN) - Get Reporttraded to an all-time intraday high of $1,080.89 Thursday morning, gapping above its July 26 all-time intraday high of $1,053.20. This parabolic move comes just before the on-line iconic retailer reports quarterly earnings after the closing bell Thursday. This raises the bar this afternoon, noting risk to fill the price gap to $1,053.20.
Given a positive but overbought weekly chart, momentum traders are expecting the stock to continue to trade higher. My call: Weakness will hold the five-week modified moving average of $1,005.15. Upside is to my quarterly risky level of $1,100.75.
Amazon closed Wednesday is $1,052.80, up 40.4% year to date, and is in bull-market territory 48.3% above its post-election low of $710.10 set on Nov. 14. Analysts expect the company to earn $1.38 a share for its quarter ended on June 30. Some worry about the stock's elevated forward price-to-earnings ratio that exceeds 150 times. A focus will be Amazon's cloud computing called Amazon Web Services, which has shown positive trends in recent quarters.
While I am focusing on its weekly chart, Amazon has been above a "golden cross" since April 25, 2016, when the stock closed at $626.20. A golden cross occurs when the 50-day simple moving average crosses above the 200-day simple moving, indicating higher prices lie ahead. This signal tracked the stock all the way to its recent all-time high.
The Weekly Chart for Amazon.com
Courtesy of MetaStock Xenith
The weekly chart for Amazon is positive but overbought with the stock above its five-week modified moving average (in red) at $1,005.15. The 200-week simple moving average or "reversion to the mean" (in green) is $555.56.
The "reversion to the mean" is an investment theory that the price of a stock will eventually return to a longer-term simple moving average, and the 200-week is simple to track. A ticker trading above its "reversion to the mean" will eventually decline back to it on weakness. Similarly, a ticker trading below its "reversion to the mean" will eventually rebound to it on strength.
The 12x3x3 weekly slow stochastic reading is projected to rise to 84.26 this week, moving further above the overbought threshold of 80.00.
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Trading strategy: Buy weakness to the five-week modified moving average of $1,005.15. Reduce holdings on strength to my quarterly risky level of $1,100.75.
My semiannual and annual value levels are $857.84 and $753.89, respectively, and the annual level held as 2017 began.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.