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Amazon Is Sitting on the Verge of a Major Breakout

Amazon rips higher on better-than-expected earnings. Here's a look at the stock and its big-time potential breakout.

Amazon  (AMZN) - Get Inc. Report shares were one of the few bright spots on Friday, ripping more than 9% and hitting new all-time highs in the sessions.

The move comes after significantly better-than-expected fourth-quarter earnings and sales. The stock leapfrogged Alphabet  (GOOGL) - Get Alphabet Inc. Report in market cap and joined Apple  (AAPL) - Get Apple Inc. Report and Microsoft  (MSFT) - Get Microsoft Corporation Report as the only U.S. stocks with a market cap north of $1 trillion.

It’s no surprise Real Money selected Amazon as its Stock of the Day.

After beating on earnings and revenue expectations, bulls finally got what they’ve been seemingly waiting forever for: New highs.

In after-hours trading, Amazon shares were well above its prior high at $2,055, which was set in September 2018. In fact, shares climbed as high at $2,133 after the bell but haven't  come near that level in Friday’s trading session.

Despite this, Amazon stock is still sitting on the verge of a big-time breakout, particularly if the broader market cooperates. Let’s look at the charts.

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Weekly chart of Amazon stock. 

Weekly chart of Amazon stock. 

Before we take a closer look at the weekly chart above, investors have to remember how Amazon stock has been trading. While Apple has basically doubled over the last 12 months and with Microsoft up 60% over the last year, Amazon’s one-year pre-earnings gain of 12% is simply unimpressive.

Even the Nasdaq has throttled that performance, up 29.5% in the same time.

That’s what makes this potential breakout so significant, as Amazon stock has been resting for quite some time and has a lot of catching up to do.

On the chart, investors can see that the 100-week moving average buoyed Amazon stock during its lull. Over the last several months, AMZN shares were trapped in an upward channel (blue lines) and began flirting with a breakout of this channel over the past month or so. The stock also reclaimed its 200-day moving average (not shown) in this run. 

Despite Friday’s big rally - which is easily outperforming the S&P 500’s loss of more than 1% - bulls are likely disappointed given how far off it is from Thursday’s after-hours price.

Still, as long as this one can hold the $2,025 mark, it will technically be over long-term resistance. From here though, we need to see AMZN build momentum. Below this mark puts Friday’s low of $2,002 on the table.

Above $1,950 and Amazon stock is technically okay, but over $2,025 is much more significant and puts $2,133-plus on the table. Longer term, $2,300 or more isn’t out of the question. Resistance could hold steady, particularly if the overall market begins to erode. But if Amazon stock can maintain above it, a big-time breakout may be underway.