Amazon.com, Inc. (AMZN​) shares fell 1.2% on Wednesday after rallying about 8.5% from $940.00 to $1,020 per share since late September. Despite the stock rising more than 30% since January, many analysts remain strongly bullish on Amazon. Wells Fargo analysts assigned a lofty $1,400 per share price target on Amazon shares, saying that the company is well positioned to apply artificial intelligence across multiple verticals and continues to benefit from cloud services.

Over the past several months, Amazon has dramatically increased its spending to enter several new vertical markets. The acquisition of Whole Foods marked its entry into the grocery market; a $4.5 billion annual budget is focused on producing and acquiring programming; and the company is actively mulling the launch of a new delivery service next year to reduce its reliance on FedEx Corporation (FDX) and United Parcel Service, Inc. (UPS). (See also: Amazon Tests Delivery Service – Targets FedEx, UPS.)

Technical chart showing the performance of Amazon.com, Inc. (AMZN) stock

From a technical standpoint, the stock experienced a bearish engulfing on Wednesday, which could indicate that its recent rally is coming to an end. The relative strength index (RSI) moderated to 58.31 – only moderately overbought – and the moving average convergence divergence (MACD) remains in a bullish uptrend dating back to early October. As a result, traders should consider a bearish short-term bias and a bullish medium-term bias on the stock.

Traders should watch for a prolonged move lower to the 50-day moving average at $972.32 or a longer-term move lower to lower trendline support near the 200-day moving average at $928.85. If the stock manages to recover from Wednesday's losses, traders should watch for a retest of trendline resistance at $1,020.00. Traders may want to consider waiting for a lower entry point at these levels, but short selling could be risky given the strong uptrend. (For more, see: Amazon to Keep Holiday Seasonal Hiring Flat.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

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