Amazon Is Becoming a Go-To for Bulls - Here's the Chart Now

Amazon is down 'just' 10% from its highs, easily outperforming the Nasdaq. Here's how the stock looks now.
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Normally it’s bad news when a stock is 10% off its high. For Amazon.com  (AMZN) - Get Report though, that’s not the case. In fact, down 10% is actually good in this market environment.

Even though the Nasdaq’s 5.6% rally on Monday is roughly double Amazon’s 3% jump, the latter is easily crushing the former in terms of outperformance, with the index still down 21.2% from its February highs.

Amazon is in prime position to take advantage of the coronavirus outbreak - even though its Prime Day will be delayed. Not that investors would root for such pandemonium, but few companies are seeing such a rush from its customers.

While Walmart  (WMT) - Get Report, Target  (TGT) - Get Report and other retailers are seeing sales rise, Amazon is seeing demand climb as well. Its Prime Video segment is surely seeing more use too as demand for streaming increases.

The initial coronavirus panic sent Amazon stock into a tailspin, sliding from $2,175 in February to $1,625 in March. The $550 drop represented a 25.3% correction, which was still better than the peak-to-trough decline in the Nasdaq, which fell 32.6%.

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Trading Amazon Stock

Daily chart of Amazon stock.

Daily chart of Amazon stock.

Amazon stock simply got caught up in the selloff. That’s clear by the stock’s rapid rebound, giving us a rare (and sometimes frustrating) “V-shaped” bottom. That’s highlighted on the daily chart above with two blue lines.

It will only take a slight rally from here to get Amazon back into the $1 trillion market cap club, rejoining Apple  (AAPL) - Get Report and Microsoft  (MSFT) - Get Report in the exclusive group.

In any regard, Amazon has already reclaimed its 200-day and 100-day moving averages, while it works on reclaiming its 50-day moving average on Monday. The stock is also coming into the $1,975 area, which has most recently acted as resistance.

If Amazon stock can clear this hurdle, it puts the $2,000 to $2,025 area in play. Above that zone and a gap-fill up to $2,100 is technically possible, although many investors may be hesitant about AMZN rallying so far while the overall market remains well off its highs.

If $1,975 acts as resistance, see if AMZN stock holds the 100-day moving average as support. Below $1,900 puts a retest of the 200-day moving average in play.