A gain of 62.56% in 2018 for shares of Amazon.com, Inc. (AMZN) likely was helped by strong institutional demand for the stock. Amazon is growing at a tremendous rate even with a nearly $1 trillion market cap. The company is firing on all cylinders and continues to show solid growth with its dominance in the cloud.
Even with terrific fundamentals, the true tell on the near-term trajectory of the stock lies in the trading activity. At many points in 2018, Amazon shares have increased in price alongside an increase in volume. This can be indicative of smart money accumulating shares. The bottom line here is that the manner in which a stock trades can oftentimes alert you to the forward fundamental picture more so than simply looking at a company's financials alone. (For more, see: Amazon to Hit $2.5 Trillion by 2024: MKM.)
For Mapsignals, the strongest indicator of positive price momentum is obtained by measuring potential institutional accumulation. In 2018, Amazon stock has logged 23 of these rare signals. We like to see bullish activity in the shares alongside solid forward fundamentals, as this indicates that demand for the stock should increase over time.
In the chart below, Amazon stock broke out to new 52-week highs on big volumes. Shares should continue the upward trajectory:
Mapsignals' goal is to identify tomorrow's top stocks today. We're basically looking for outlier companies with healthy fundamentals accompanied by outsized, unusual institutional trading activity. By studying these data points, we can hypothesize which equities institutions are trafficking in and marry this information with fundamentally sound companies. We want the odds on our side when looking for the highest-quality stocks.
When deciding on the strongest candidate for long-term growth, we consider many technical areas important to success. A few of these for Amazon are as follows:
Below you can see points in 2018 where Amazon made buy signals for Mapsignals:
**Data provided by MAP, IEX, FactSet and Tiingo
On top of a great technical picture, one should also look under the hood to see if the fundamental picture supports a long-term investment. As you can see, Amazon has solid sales and earnings growth rates:
- One-year sales growth rate: +39%
- One-year operating income increased to $3 billion from $628 million in 2017
- Third quarter net sales guidance expected growth: +23% to 31%
Amazon checks the box on strong technicals and fundamentals while showing bullish institutional momentum in 2018. We believe that the current level for the shares is in position for further upside. All of this points to further long-term bullish action for the stock. (See also: Is Amazon Getting Serious About Blockchain?)
The Bottom Line
Amazon stock represents a potential buying opportunity for the long-term investor. Given the solid earnings growth, revenue growth and multiple unusual accumulation signals, this stock could be worth a spot in a growth-oriented portfolio.
To learn more about Mapsignals' institutional signals, please visit our "About Us" page.
Disclosure: The author holds no position in Amazon shares at the time of publication.