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Amazon.com (AMZN) Shows Strength in Trading and Positive Outlook for Investors

StockInvest.us, 2 months ago

Amazon Technical Analysis

Amazon.com, Inc. (AMZN) has been showing signs of strength in the recent trading sessions. Its close on December 22, 2023, at $153.42, represents a minor decline of 0.27%, which can be construed as a consolidation after a noteworthy rally from its year low of $81.43. Technically, AMZN displays a bullish posture, given its trading above the critical 50-day ($140.82) and 200-day ($126.24) moving averages. The 14-day Relative Strength Index (RSI) at 68 is nearing overbought territory, which may lead to some caution among investors. However, the Moving Average Convergence Divergence (MACD) reading at 1.51 suggests positive momentum in the near term.

The stock's Average True Range (ATR) of 2.08 exemplifies recent volatility, which could impact the next day's trade range. The established support level at $149.97 may serve as a robust floor if any pullback occurs. On the other side, the stock faces immediate resistance at $153.79, slightly above its last close. Should this resistance level be breached, it could make way for further gains.

Fundamental Analysis

Fundamentally, Amazon is a behemoth with a market capitalization of $1.59 trillion, highlighting its massive scale and impact on the market. The earnings per share (EPS) of $1.92 combined with a relatively high price-to-earnings (PE) ratio of 79.91 indicates a premium valuation, which investors may be willing to pay for its growth potential and market position. Although Amazon is known for its thin profit margins, this is due to its aggressive reinvestment strategy aimed at fueling growth, a narrative supported by recent news that highlights Amazon's pivotal role in e-commerce, cloud computing, and digital advertising.

Amazon Moreover, the coverage on Amazon's advancement in the generative AI race and recent expansion of AWS in Canada reflect the company's strategic initiatives to fortify and expand its leading position in the technology and cloud infrastructure sectors. These moves are likely to support Amazon's long-term earnings trajectory despite the near-term emphasis on investment over profits.

Considering the earnings announcement set for January 31, 2024, investors may remain optimistic, anticipating favorable results that might continue to boost the stock's momentum in the upcoming week.

Short-Term Outlook

For the next trading day on December 26, 2023, and the forthcoming week, AMZN's stock performance may show an uptick given the stock's positive momentum and the technical indicators that suggest strength. The holiday season, combined with the general optimism surrounding technology stocks that excel in AI, may further buoy the company's share price. However, investors should be mindful of the RSI approaching overbought territory and be prepared for potential volatility around resistance levels.

Overall Evaluation

Based on the technical and fundamental analysis, AMZN should be categorized as a 'Buy' for investors with an appetite for growth stocks and tolerance for associated market valuations and volatility. The favorable technical setup, promising AI-oriented strategic moves, and the company's consistent focus on expansion signal a positive outlook. That being said, the elevated PE ratio and near-overbought RSI status call for cautious optimism, endorsing the likelihood of positive short-term performance whilst also considering the potential for price pullbacks and normal market fluctuations.

Check full Amazon forecast and analysis here.