Shares of Amazon (NASDAQ:AMZN) have been bursting higher, rallying past $2,000 per share this week and helping lead the charge on new record highs for the Nasdaq. Unlike the Nasdaq though, Amazon stock is not yet at new record highs. Will it be able to get there?
The stock is trading is at its highest level since the first day of the fourth quarter. Since then, it has embarked on numerous rallies and deep declines. The way the charts are setting up, a test of the prior highs or a run to new highs is certainly possible.
As you can see on the chart below, the Amazon stock price breached the $2,030 level twice. These moves came in early September and early October, before cascading lower. Amazon stock bottomed out just above $1,300 in December, down more than 36% from its highs.
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The peak-to-trough decline was better than a number of high beta stocks, but almost twice that of the PowerShares QQQ ETF (NASDAQ:QQQ).
Amazon is not yet overbought, as indicated by the RSI reading at the top of the chart (blue circle). If the overall market can hold up, Amazon can continue to power its way higher. After all, its most recent earnings report in April was strong, it just happened to come right ahead of a major fall in the market.
Those earnings results could give investors optimism for the upcoming report later this month, helping to bid shares higher ahead of the report. Further, Prime Day is just a few days away (starting on July 15th). That’s an event investors are apparently buying ahead of, and it may set up for a sell-the-news situation as a result.
The Prime Day catalyst could actually time up perfectly with a run up toward its all-time high at $2,050.50. If Amazon’s rally sputters and pulls back ahead of earnings, it could be an opportunity for investors to buy the dip. That’s particularly true if AMZN stock dips down to $1,950 and this level acts as support.
Those are now the two levels to watch: $2,050 on the upside and $1,950 on the downside.
Amazon vs. FAANG
A few weeks ago when the S&P 500 was hitting new highs, the Nasdaq was not. We pointed out that it didn’t have the participation from FAANG.
Of the group, only Amazon was less than 10% off its all-time highs. In fact, Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) were all at least 13% off their highs at the time.
Even with Amazon carrying the load (along with Microsoft (NASDAQ:MSFT), which has been a beast) how long can the Nasdaq hit new highs without its biggest components doing better?
For now, FAANG (minus AMZN) is still at least 7% off its all-time highs. Imagine the boost the Nasdaq would catch if big money started flowing back into these names again. In that case, imagine how well Amazon stock would do, given that it already has bullish momentum.
FB and NFLX may be leading in year-to-date gains, but AMZN doubles the next best performer on the one-year timeframe.
Simply put, this name is crushing its peers.
Bottom Line on Amazon Stock
With Prime Day approaching and the Nasdaq drifting higher, Amazon stock could continue to rally. A move up toward the $2,050 level may be met by sellers initially, but a pullback would all be too healthy for bulls. Particularly if they’re optimistic ahead of earnings.
The stock continues to perform well and is outrunning its FAANG peers at the moment. On July 11, for the first time in almost a year, Amazon stock topped a $1 trillion valuation.
Long-term investors who like the name should take advantage of large swoons in Amazon. It dominates in various secular growth themes and has clearly positioned itself as a leader in tech.
Its strong earnings growth (estimates call for 35% growth this year and 40% growth in 2020) makes the valuation more palpable. Even better? AMZN has been crushing earnings estimates over the last seven quarters, while its immense cash flow buoys any financial worries from investors.
That said, we saw a 35%+ correction in Q4 and ~15% pullback in the month of May. These are the types of swoons to take advantage of for those looking for longer-term entries.
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