POW! Amazon to Put Comics on Kindle Fire as Momentum Bubble Bursts

NEW YORK (TheStreet) -- I haven't read a comic book since I was a kid, but I think offering comics though comiXology on the Kindle Fire is a great idea. I bought my wife a Kindle Fire for Christmas, her first adventure into the computing world, and she loves it.

Innovation has never been an issue for Amazon.com (AMZN) but with a 12-month forward price to earnings ratio of 140.31, the stock is not a value investment. Unfortunately, it's also no longer a momentum stock. Its momentum bubble has popped.

On March 28 in, Pop! Goes the Momentum Bubble I warned the momentum bubble was starting to pop. Amazon was one of eight stocks profiled.

The daily chart for Amazon shows the stock set its all-time intraday high at $408.06 on Jan. 22, which was a failed test of our first-quarter risky level at $402.56. This gave investors the opportunity to book profits.

Notice that over the last two years buying the stock at its 200-day simple moving average (in green) provided buying opportunities two times; in November 2012 and May 2013. The stock is now below its 200-day SMA at $341.19 breaking below this 'reversion to the mean' on April 3. The stock is below its 21-day and 50-day SMAs at $344.90 and $353.11 with the 12x3x3 daily slow stochastic trying to rise out of oversold territory.

Courtesy of MetaStock Xenith

The weekly chart for Amazon is negative with the stock way below its five-week modified moving average at $345.89. Note that the stock crossed its 200-week SMA at three points over the last 12 years; May 2003, between January 2006 and April 2007, and between October 2008 and February 2009 when the bubble began to inflate. The 200-week is currently at $235.22, which is a big drop to this longer-term "reversion to the mean."

Courtesy of MetaStock Xenith

Investors should consider entering a GTC (good until cancelled) limit order to buy weakness to an annual value level at $259.67. The stock traded around its annual pivot at $334.95 between March 27 and March 31 before the break below its 200-day SMA at $341. Former semiannual value levels at $351.24 and $359.11 became pivots between Jan. 31 and March 26 and are now risky levels.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com.

If you liked this article you might like

7 Inexpensive ETFs for Small-Cap and Micro-Cap Exposure

7 Inexpensive ETFs for Small-Cap and Micro-Cap Exposure

Video: Best Presidents Day Deals!

Video: Best Presidents Day Deals!

From Catalogs to Catastrophe: A Sears Timeline

From Catalogs to Catastrophe: A Sears Timeline

Inside Goldman Tech Conference: Key Takeaways on Bitcoin, Ethereum and ICOs

Inside Goldman Tech Conference: Key Takeaways on Bitcoin, Ethereum and ICOs

Only Wall Street's Dumbest Think Amazon Will Be Able to Skirt Regulation Forever

Only Wall Street's Dumbest Think Amazon Will Be Able to Skirt Regulation Forever