Amazon.com Inc. (AMZN) - Get Report ended last week in bull market territory 24% above its Dec. 24 low of $1,307.00. The stock is also in bear market territory down 21% since setting its all-time intraday high of $2,050.50 on Sept. 4. Strength so far in 2019 peaked at $1,736.41 on Jan. 31 and the subsequent low has been $1,566.75 set on Feb. 8. This is your trading range.
The mantra is to "buy low and sell high" and Amazon is closer to the low. The stock opened Monday holding its 50-day simple moving average at $1,628.15 and pivot for this week is at $1,633.68. Holding these key levels targets the 200-day simple moving average at $1,727.80, which is just below the trading range high. This trading range is consolidating the bear market decline of 36% from its all-time high of $2,050.50 to the Christmas Eve low of $1,307.00.
Before the downside volatility, Amazon had a solid 51% bull market run between its April 4 low of $1,352.88 to the all-time intraday high. This Bull Run was fueled by a positive reaction to earnings released on April 26. The high set on Sept. 4 was helped by the earnings report released on July 26. On the flip side of the all-time high was a negative reaction to earnings released on Oct. 25. The Jan. 31 high of $1,736.41 was set in anticipation of a positive reaction to earnings.
I continue to view the stock as the "United States of Amazon" as longer-term growth remains highly likely. Amazon Web Services will remain the global cloud computing leader. Advertising dollars are on the rise. Whole Foods supermarkets may not be their only food stores as they are considering buying local supermarkets. Amazon Prime memberships should continue to grow. Last mile deliveries are now being made by their own fleet of trucks. I took this photo recently.
The Daily Chart for Amazon
Courtesy of Refinitiv XENITH
The daily chart for Amazon shows the 2018 bull market run that ended on Sept. 4, then the bear market decline into Christmas Eve. What does not show is the fact that the stock spiked as high as $1,777.17 in after-hours trading on Jan. 31 on an initial positive reaction to earnings. This after-hours high was just shy of my semiannual risky level of $1,782.25. The stock is between its 50-day simple moving average at $1,628.78 and its 200-day simple moving average of $1,727.82, which is a short-term trading range. The Dec. 31 close of $1,501.97 was an important input to my proprietary analytics and resulted in my annual value level at $1,316.06 and my semiannual and quarterly risky levels at $1,782.25 and $1,947.78, respectively. The Feb. 28 close of $1,639.83 was input to my analytics and resulted in the monthly risky level at $1,762.80. My weekly pivot (or magnet) is $1,633.68.
The Weekly Chart for Amazon
Courtesy of Refinitiv XENITH
Amazon has a positive weekly chart with the stock above its five-week modified moving average of $1,631.29. The stock remains well above its 200-week simple moving average or "reversion to the mean" at $1,039.37. The 12x3x3 weekly slow stochastic reading is projected to rise to 72.81 this week up from 69.67 on March 8. This is an important reason to be long the stock.
Trading Strategy: Buy the stock down to my weekly pivot and its 50-day simple moving average at $1,633.68 and $1,628.37, respectively, and reduce holdings on strength to its 200-day SMA at $1,727.86 and to my monthly and semiannual risky levels at $1,762.80 and $1,782.25, respectively.
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Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.