Is the Bull Market in Amazon.com Back?
For the past few months, short-term strength in the market for shares of Amazon.com (NASDAQ: AMZN) was something to be sold rather than celebrated.
Trading in bear market territory since November 2011, AMZN was actually moving lower and selling off from new highs as the same time that much of the market was bottoming and preparing to move higher. When Citigroup (NYSE: C) and Bank of America (NYSE: BAC), stocks that would help lead the markets higher in 2012, were trading at their yearly lows in the fall of 2011, Amazon.com still had plenty of room to run, climbing for another two weeks before finally topping in October.
In the months since, it has been the banks that have been most sought after by buyers. And stocks like Amazon.com have been left to the ash heap of 2011. Dropping into bear market territory during a sharp, five-day sell-off in the middle of November, Amazon.com has toiled away below its 200-day moving average for months, finally breaking out back above that level in Monday’s trading.
Again, for most of the recent past, rallies in Amazon.com existed solely to dash the hopes of those in Amazon.com’s buy and hold camp – and to enrich those traders and active investors who were able to take advantage of short-term overbought extremes. And whether the goal was simply to lighten portfolios overweight with the stock or, for the more aggressive traders, to sell shares short outright, brief buying frenzies in January and February were well-anticipated by ratings downgrades and negative, short-term edges.
Amazon.com’s move back into bull market territory will have many more traders considering trading the long side of the AMZN market. And no doubt some will be onboard as early as Monday’s aftermarket. However, in the near-term, the stock is among the more, short-term overbought, earning the same “consider avoiding” ratings that accompanied previous overbought rallies in AMZN in February, January, and even early December. Additionally, Amazon.com has earned a negative, short-term edge of nearly 1%.
These are reasons enough for short-term traders and active investors to be somewhat wary of jumping on board any Amazon.com bandwagon immediately. Given the stock’s low ratings and negative, short-term edge, there are reasons to believe that tickets for Amazon.com’s ride higher soon may be available at lower prices than they are right now.
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David Penn is Editor in Chief of TradingMarkets.com