Amazon Pops Then Drops From Trillion-Dollar Value

Amazon.com, Inc. (AMZN) followed Apple Inc. (AAPL) to be the second company to achieve a market capitalization of one trillion dollars, but only for a blip when the stock set its latest all-time intraday high of $2,050.50 on Tuesday, Sept. 4. Shares of Amazon ended Tuesday at $2,039.51, up 74.4% year to date and solidly in bull market territory at 61.1% above the 2018 low of $1,265.93 set on Feb. 9. I have been calling the stock the "United States of Amazon" as it grows in almost every segment of the global economy.

Amazon Web Services remains the global cloud computing leader, advertising dollars continue to rise, and consumers enjoy shopping at Whole Foods supermarkets. Amazon Prime membership has not slowed down even with the higher $119.00 membership fee. (See also: Amazon Joins the Trillion-Dollar Market Cap Club.)

The daily chart for Amazon

Daily technical chart showing the performance of Amazon.com, Inc. (AMZN) stock
Courtesy of MetaStock Xenith

The daily chart for Amazon shows that the stock began 2018 well above a "golden cross," which justified a core long position since March 2015, when the stock was trading just below $400 per share. That's when the 50-day simple moving average rose above the 200-day simple moving average, indicating that higher prices were ahead. Today, the 50-day and 200-day simple moving averages are at $1,839.03 and $1,539.39, respectively. The stock has been above the 50-day simple moving average since April 26.

The two horizontal lines in the middle of the chart are my quarterly and semiannual value levels of $1,599.82 and $1,546.97, respectively. Above the high is a horizontal line that represents this week's risky level of $2,059.73. Further above but not shown is my risky level for September at $2,188.11.

The weekly chart for Amazon

Weekly technical chart showing the performance of Amazon.com, Inc. (AMZN) stock
Courtesy of MetaStock Xenith

The weekly chart for Amazon is positive but overbought, with the stock well above its five-week modified moving average of $1,891.50 and also well above its 200-week simple moving average of $862.10, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 90.74 this week, moving well above the overbought threshold of 80.00. If the reading ends the week above 90.00, the stock will become an "inflating parabolic bubble."

Given these charts, investors should buy Amazon shares on weakness to my quarterly and semiannual value levels of $1,599.82 and $1,546.97, respectively, and reduce holdings on strength to my weekly and monthly risky levels of $2,059.73 and $2,188.11, respectively. (For more, see: Amazon to Challenge Google, Facebook in Online Ads.)

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