Beware the big Amazon bounce.
Those are words of wisdom from one technician who believes the charts could be signaling that the stock is prime for a breakdown. This is following Amazon’s rally of about 5% after the company reported a “record” holiday shopping season, highlighting “billions” of products sold worldwide and that more people used Prime this holiday season than ever.
The result of last week’s breakout? More than $50 billion added to Amazon’s market cap.
But Matt Maley, chief market strategist at Miller Tabak, said signs of a pullback are brewing around one key technical: the stock’s 200-day moving average.
Despite breaking out above that trend line last week, Maley points out that according to his charts, Amazon is actually now overbought and it could be time for a “breather.”
“On a longer-term basis, [if you look] at the weekly RSI chart, [Amazon is] getting very overbought,” he said Friday on CNBC’s “Trading Nation.” “In fact, the last two times it was this overbought, [the stock saw pretty severe pullbacks.]”
Maley makes the case that whenever this pullback takes place, he’ll be eyeing that 200-day moving average to see what the stock does from there. Should Amazon break below the 200-day, then even more trouble could be ahead for the name.
But should the stock bounce from that trend line, then Amazon “could explode to the upside,” the strategist added.
From a fundamental standpoint, however, Steve Chiavarone, portfolio manager at Federated Investors, said that the consumer is about to see another strong year. This will especially be a boon for e-commerce, which Chiavarone said drove this year’s Super Saturday (the last Saturday before Christmas) record sales numbers.
And there’s no reason for consumers not to show up in 2020, as well, according to Chiavarone.
“Over the long run, if you think the consumer is strong and e-commerce continues to have a place and it’s taking share, Amazon should be well-positioned as are other e-commerce plays,” he said in the same “Trading Nation” interview.
Amazon has rallied nearly 25% this year. Last week’s bounce effectively broke the stock out of an almost five-month trading range.