Next Stop for Amazon Stock Is $1000
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There is absolutely no reason to try and stand in front of a freight train, and for those dumb enough to do so, the chances of surviving are slim to none. Amazon.com, Inc.(NASDAQ:AMZN) stock is a perfect example of this freight train, and anyone who has ever tried to take a contrarian position against this e-commerce giant has suffered in terms of losses. I have reason to believe that the Amazon stock freight train will continue charging ahead, running over anything that stands in its way.
To be honest, I too have had my doubts with a company that commanded such a huge market capitalization and didn’t turn a profit till recently. The only solace I have is that I base my investment decisions and views on the price chart. For those not familiar with my work, this style of investment analysis is known as technical analysis. This method of analysis is predicated on the notion that historical price and volume data can be used to discern trends and forecast future prices. As absurd as this method may sound, I have found great success in my trading strategies using this body of knowledge.
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This body of knowledge is suggesting that AMZN stock will continue charging ahead, and it would be ill-advised to try and stand in the way of this freight train.
The following Amazon price chart illustrates a couple of indicators that continue to support the notion of higher AMZN prices.
Chart courtesy of StockCharts.com
There are two distinct indications on the price chart above that support the view that higher Amazon prices are on the horizon.
The first indication is from the uptrend line that has served to support the price of AMZN shares since they bottomed in 2015. This simple tool is created by using a trend line that connects the valleys on the price chart. This upward-sloping trend line represents the bullish trend in Amazon stock, and as long as price remains above this line, then the bullish trend towards higher prices is set to continue.
The second indication is from the alignment of the 50-day and 200-day moving averages. This bullish alignment first presented itself in February 2015, when the faster 50-day moving average crossed above the 200-day moving average. This moving average cross is referred to as a golden cross. This indicator is used to confirm that a new trend towards higher prices has begun.
In the spring of 2016, the golden cross was in danger of averting, but price quickly accelerated higher, averting a death cross. A death cross implies the exact opposite implications of a golden cross. The inability to generate the bearish death cross indicator only serves to reaffirm the notion of a bullish trend.
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Amazon is currently above both moving averages, and the uptrend line suggests that the path of least resistance is towards higher prices.
The following AMZN stock chart illustrates that the bullish signals continue to mount.
Chart courtesy of StockCharts.com
The Amazon stock chart above illustrates an indicator that effectively confirmed every bullish advance, and every bearish pullback.
The indicator in question is located in the lower panel and is labeled “MACD.” This acronym stands for “moving average convergence/divergence” and it is used as a simple, yet effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bearish and bullish momentum.
There is a slight lag to this indicator, but it has worked great at confirming the direction of the predominant trend. In January 2015 and April 2016, this indicator effectively confirmed that a bullish advance was in effect. In December 2015 and October 2016, this indicator effectively confirmed that a bearish pullback was in play. Just using this indicator for a trading strategy would have proved to be a profitable venture.
In January of this year, a new bullish cross was generated, and based on the precision of the previous signals, I can only assume that a bullish advance has just begun.
The following Amazon price chart illustrates a price pattern that upon completion, carries bullish implications.
Chart courtesy of StockCharts.com
The Amazon stock chart above illustrates that a technical pattern has been in development for the last five months. This bullish pattern is known as the “cup and handle” pattern, and the name effectively describes the shape that the pattern creates on the price chart.
This pattern was created when Amazon shares met resistance at $845.00 and a correction ensued. The next time Amazon share met this level of resistance, a smaller correction ensued, and as a result of these reactions off resistance, the cup and handle pattern was created.
These patterns are instrumental on two fronts. Firstly, once the pattern breaks above resistance, it suggests that higher prices are likely. Secondly, this pattern can be used to construct a potential price objective.
In order to generate this price objective, the depth of the cup is measured, and it is then projected above the level of resistance that has contained the price. This method creates a potential price objective on AMZN stock of $980.00. This target, just shy of $1000, is contingent on a successful breakout above resistance.
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Bottom Line on Amazon Stock
The Amazon stock chart continues to support the notion of higher stock prices, with multiple indicators confirming this view. New indicators continue to mount, suggesting that the $1000 level could be the next level that is tested. The only prudent position I can carry on AMZN stock given this evidence is a bullish one.
