Trading Opportunities: Is Amazon Stock a Buy?

Amazon's stock price is starting to show some momentum. Will the stock break above its February high and ride to its next resistance level? Keep an eye on its SCTR score. If it stays above 70, this could be a nice ride.

The StockCharts Technical Ranking (SCTR) scan that identifies large-cap stocks showed Amazon, Inc. (stock symbol: AMZN) as one of the results. The stock has been trending higher for the last few months, with its SCTR and relative performance to the S&P 500 index ($SPX) also trending higher (see chart below).

CHART 1: AMZN STOCK CHART (DAILY). Amazon stock is trending higher with a rising SCTR and relative strength against the S&P 500 index. Does the stock have the potential to move higher?Chart source: StockCharts.com (click on chart for live version). For educational purposes only.

Amazon's stock has faced headwinds of late but it is trading above its 50-, 100-, and 200-day moving averages. Is this jump in price going to take it higher?

One thing AMZN has going for it is that online retail sales are up. April data shows that retail sales were up 0.4%, with online retail sales up 1.25%. It's lower than estimates, but it's still a positive reading. And that may have to do with higher prices rather than positive consumer sentiment.

The downside: Consumers are struggling with higher prices. The big question for AMZN is if rising prices will be enough to offset lower consumer demand.

Zeroing In: Daily Price Action in AMZN Stock

Notice how, when AMZN started moving higher from January to its February high of $114, it quickly pulled back. The stock price is now revisiting that previous high of $114. When you look at these two highs, some differences are evident.

In February, the SCTR score crossed the 30 level, which is well below the 70 threshold of this scan. And relative performance quickly turned lower. There's a chance it could do the same thing this time. While this isn't an Amazon stock forecast, the high SCTR score could help propel AMZN higher.

A Weekly Perspective of AMZN Stock

The weekly chart of AMZN stock may not present as positive a picture as the daily chart, but it's a good one to add to your ChartLists to keep an eye on the bigger picture.

CHART 2: AMZN STOCK CHART (WEEKLY). The weekly chart may not paint as positive a picture as the daily chart, but there are some indications of the stock price moving higher.Chart source (click on chart for live version): StockCharts.com. For educational purposes only.

The SCTR is above the 70 level, which is a positive indication for the stock price to move higher. The 50- and 100-week moving averages are trending lower. The 100-week moving average (MA) is almost crossing below the 200-week MA, which would present a negative scenario. Relative performance with respect to the $SPX could break above the downward-sloping trendline, which would be positive for AMZN's stock price.

How to Trade AMZN Stock

Looking at the daily chart, if the stock breaks above $113.84 (dashed horizontal green line on daily chart) and there's enough follow through, it could present a buying opportunity. If there's a pullback in price, watch the SCTR score. It should stay above the 70 level. Relative strength against the S&P 500 index is inching into positive territory. If it continues to move higher it could bode well for the stock.

Watch for any pullback in price and how it reacts to the February high. Volume is another key indicator. A follow-through on high volume could boost the stock price higher, but if volume starts dwindling, it may be better to wait on the sidelines until another buying opportunity arises in this stock.

Looking at the weekly chart, there's a chance the stock could move as high as its 200-week MA to $130. But if the 100-week MA crosses below the 200-week MA, AMZN could experience a pullback.

Since anything can happen to the stock's price, it's a good idea to place a stop order based on how much risk you're willing to take for a potential $16 per share reward. In the daily chart, the red-dashed line at $110 could be a potential stop order. If the stock falls below $110, it could go much lower. If you're willing to take on more risk, you may want to use a wider stop, such as the 200-day MA.

Other Stocks From the Scan

Here are some other stocks that showed up on the large-cap SCTR scan.

Applied Materials (AMAT) Hyatt Hotels Corp. (H) Honda Motor Co. Ltd. (HMC) Jabil, Inc. (JBL) KLA Corp. (KLAC) Kimberly Clark Corp. (KMB) Procter & Gamble Co. (PG) Yum! Brands, Inc. (YUM)

Looking Back at GOOGL

On May 9, Alphabet Inc. (GOOGL) was featured as the SCTR scan candidate. Let's look at how that stock is performing.

CHART 3: GOOGL STOCK CHART (DAILY). GOOGL stock continues to move higher. Watch the next resistance level at $121.86.Chart source: StockCharts.com (click on chart for live version). For educational purposes only.

The SCTR continues to rise. It's well above the 70 level, and the stock's performance against the benchmark S&P 500 is also climbing higher after breaking above the triangle pattern that formed when the original article was written.

If you bought the stock at $108 or above, it has moved above its 100-week moving average. The next visible resistance level on the weekly chart is $121.86. The price is almost at that level; let's see how it does there.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.