Amazon.com, Inc.: $1,157 Price Target in AMZN Stock?
Profit Confidential - Sep 24, 2016
Who would have ever thought that a small company that sells books online would become one of the biggest e-commerce companies on the planet? Amazon.com, Inc. (NASDAQ:AMZN) stock has taken the world by storm and has surprised many investors in the meantime. I like AMZN stock and it is not for any fundamental reason; my bias toward Amazon stock is instilled in its beautiful price chart.
Not every ticker I come across adheres to technical price objectives, and many just succumb to general market noise. The best tickers are the ones that have the following characteristic: consistent high volume. This characteristic helps to reduce some of the random noise associated with equities. Amazon stock is a name that is widely followed and heavily traded and, because of this, many of the signals that are generated on its price chart have an above-average probability of executing.
The following chart illustrates the bullish developments in Amazon stock.
The bull market run illustrated on the chart above began in early 2015 and was confirmed when AMZN stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon. It is always wise to trade in the direction of this momentum indicator and the chart above illustrates why; AMZN stock is up 109% since this signal executed.
In April, a death cross executed but was quickly averted. A death cross is the exact opposite of a golden cross and has bearish implications. The fact the death cross was unable to sustain itself has tremendous bullish implications. Averted signals are rare but, when they do appear, they should never be ignored. This phenomenon has come to be a favorite of mine. Averted signals add fuel to an existing predominant trend. Traders view the bearish indicator and some of these traders act by taking the other side of the trade, either exiting long positions or entering short positions. When the bearish signal averts, these new positions need to be unwound. The process of unwinding is like adding fuel to a fire and, as a result, the prevailing trend tends to accelerate.
The following AMZN stock chart illustrates the relationship between the share price and the 50-day moving average.
The chart above illustrates that Amazon stock has a strong relationship with the 50-day moving average. This trend-identifying moving average has served as a level of support during this bull run. Many selloffs during this time span found support at this level, as traders have identified this level and have supported prices as it approaches that level.
Another relationship exists between the price of Amazon stock and the distance it trades above the 50-day moving average. On four occasions when Amazon stock reaches a level that is greater than 20% above the 50-day moving average, the share price resists moving any higher. With this relationship in mind, AMZN stock could surge to $915.00 before a temporary price ceiling is hit.
The following chart illustrates the bullish wave structure in Amazon stock that reaffirms the bullish bias.
The chart above illustrates the bullish price action using a weekly scale. Bullish charts contain impulse waves (highlighted in green) that thrust higher, and consolidation waves (highlighted in purple) that serve as a counter-trend move. Consolidation waves serve to set up the proceeding impulse wave.
The first impulse leg was $411.00 in length and, if I assume that the second leg will at least match the first, then a target price of $885.00 is obtained. If I take this relationship one step further and assume a similar matching of waves but on a percentage basis, I get a price target of $1157.00. This is quite a large range, but I actually believe that AMZN stock will achieve both levels.
The Bottom Line on Amazon Stock
I am bullish on Amazon stock and my bias has been built from the evidence I was able to extract from the AMZN stock chart. My bias will remain bullish for as long as the signals I receive from the price chart are bullish. If the charts suggests a bearish outcome, my bias will switch accordingly.
