On July 3rd I mused here (http://investorplace.com/2013/07/amazon-should-make-a-run-to-300/) that ‘Amazon Should Make a Run to $300.’ Now, six full trading sessions later Amazon.co, Inc (AMZN) has hit and even marginally exceeded my $300 price target and it’s time to revisit the charts. In short, the 8.30% rally since July 3rd has pushed the stock into overextended territory.
The first chart I showed on July 3rd was similar to the one below, although a little longer in time-frame. The stock keeps pulling back to its 2012 support line, which eventually was enough to push it to fresh all time highs over the past two weeks.
If we look at the steepness which the stock’s slope has recently taken and note how far it now is extended from the 2012 up-trend, chasing the long-side here is difficult at best.
The daily chart of Amazon.co, Inc (AMZN) shows the powerful breakout much clearer. Note that after a re-test of the red breakout level on June 24th the stock had done all it needed to qualify for a powerful upward surge. Also see how the 50, 100, and 200 day simple moving averages were closely bunched together, which helped to coil up the stock for the move higher.
Momentum oscillators such as the stochastics, the RSI (relative strength index) and even the McClellan indicator on Amazon.co, Inc (AMZN) are all in seriously overbought territory at this stage, to no great surprise. What is missing however and something I like to see before flipping medium-term bearish on a name is negative divergence between momentum and price. This is missing both on daily and weekly charts. In other words, meaningful tops often develop when upside momentum fades but the stock continues to climb. Amazon.co, Inc (AMZN) however keeps climbing as momentum also climbs.
In summary, while the stock rally over the past two weeks has been steep and the stock is immediate-term overbought, on the longer time-frames of 3 – 6 months the stock still looks to have some upside left, at least until such time that momentum negatively diverges from price.