The stock has been strong as a momentum stock for many years. It set its all-time intraday high at $3,773.08 on July 13 and is 12.7% below this high. At Wednesday’s close of $3,295.30 the stock is up just 1.2% year-to-date. It’s up 102.7% from its low of $1,626.03 set on March 16, 2020.
Amazon is not cheap. Its p/e ratio is elevated at 57.88% and it does not offer a dividend.
If you are buying this stock, I suggest you use a sell stop. This could be a price gap below the 200-day SMA at $3,273.07.
You had two buying opportunities over the last 52 weeks. The stock tested its 200-day SMA at $3,073.65 on February 25, 2021. It also tested the 200-day SMA at $3,203.61 on May 10. You could have booked profits on the test of its quarterly pivot at $3,589.11 on July 6.
The Daily Chart for Amazon.com
Shares of Amazon.com have been above a golden cross since February 6, 2020, which is not shown on this chart. The 50-day simple moving average was above its 200-day simple moving average until April 21 when there was nearly a crossover. This attempt ended on May 6 keeping the 50-day above the 200-day. This provided the momentum to achieve the all-time intraday high of $3,773.36 on July 13.
Before setting the high the stock tested its quarterly pivot at $3,589.11 on July 6. This level became a magnet between July 16 and July 29. The price gap lower on July 30 was due to the negative reaction to weak forward earnings guidance.
The monthly and semiannual pivots at $3,373.29 and $3,383.45 became magnets as August began. The stock traded as low as $3,269.67 today as the 200-day SMA held at $3,273.07.
The Weekly Chart for Amazon.com
The weekly chart for Amazon.com is negative with the stock below its five-week modified moving average at $3,413.43. It’s well above its 200-week simple moving average or reversion to the mean at $2,187.54. The 12x3x3 weekly slow stochastic reading is declining at 51.62.
Trading Strategy: Buy Amazon.com on weakness to its 200-day simple moving average at $3,273.07 with a sell stop on a price gap below this average. Reduce holdings on strength to its monthly and quarterly pivots at $3,373.29 and $3,383.45.