Amazon.com, Inc. stock has been the stand out performer since the broader markets hit a bottom in February. Shares are up over 30 percent since plotting a low of $480, earlier in the year.
However, price action over the past few sessions indicate that bulls are running out of steam and the stock may retrace from current levels.
Amazon.com Bears Scheming a Comeback
Amazon’s daily price chart is a textbook example of how an uptrend looks like. Successive higher peaks and higher troughs took shares to an all time high of around $720. But since then, indecision seems to have set in among traders.
AMZN corrected to the support zone of $690. That’s normal in any uptrend. But what should worry traders, who were looking for a dip to enter the stock, is the appearance of a large bearish candle on Monday that took out Friday’s low. Yesterday’s session has increased the odds of shares not making a rapid dash to scale the prior peak.
A lower bottom is most likely in place. Watch out for a convincing close below $690. That should signal the start of a short term down trend, and could take shares all the way down to $660.
No Cause for Concern for Long Term Amazon.com Bulls?
Regardless of the recent weakness in the stock, investors can take solace from the fact that the long term growth story of the both the company and the stock are very much intact.
“(Amazon) is a multi-decade company,” according to Victor Anthony, managing director at Axiom Capital Management. “They are in the early innings…of consolidating the retail environment.”
The extent of bullish sentiment on Wall Street can be gauged from the fact that a string of analysts have recently upgraded the stock. Bernstein, in fact, upped its target price to $1,000, citing current Street consensus as “shockingly low.”
“Amazon does not trade anywhere near what we think it is worth on a fundamental basis,” Bernstein wrote in the note to clients. “We are bullish in the short, medium, and long term…and see margins expanding much faster than they have in the last two years.”
Since nothing perpetually moves higher, Amazon, most likely, will enter in to a phase of consolidation. And post that, if the broader markets don’t disappoint, expect the stock to tread higher.
Shares of Amazon.com, Inc. closed Monday at $696.75, down 0.9 percent for the session.