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Trends & Analysis
News

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News

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News

Europe stocks hit record high on strong earnings

News

BRIC currencies mostly gain as US inflation rises

News

Refresh your portfolio with Coca-Cola?

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Asset Watch

How to play Amazon’s magnificent momentum

Thursday, December 19, 2024

With Treasury yields rising and resilient economic data spurring fears of a more hawkish Fed, cyclical stocks have suffered recently while Big Tech has shined. And as heavyweights like Tesla, Apple, Amazon, and Alphabet outperform, only NVIDIA has been a noticeable laggard lately.

But, because momentum cuts both ways, you should monitor some key levels to avoid suffering through a potential reversal.

Upgrade to $265

TD Cowen analyst John Blackledge upgraded Amazon on Dec. 12 with a new price target of $265.

As his top large-cap internet stock for 2025, he noted how 80% to 90% of household goods have low average selling prices (ASP). He said, “We view [Amazon’s] delivery speed as a tailwind driving rising penetration & market-share gains for low ASP goods.”

The company’s AWS cloud-computing business could also rise by 21% in 2025, as it benefits “from enterprise workload migration alongside burgeoning GenAI offerings.”

As such, the long-term fundamentals may support more upside in the months ahead.

What about the short term?

With momentum bolstering the Big Tech basket, popular names have risen sharply. Yet, with Amazon’s long-term price support closer to $200, you should watch some meaningful moving averages to determine when the momentum could shift.

Amazon has closed above the 5-day moving average (the blue line) for 15 of the last 16 days, and it’s a popular metric among day traders. But if it breaks, the 10-day MA (the yellow line) deserves plenty of attention.

Why prioritise the 10-day MA?

The 10-day MA could be the short-term line in the sand because Amazon’s last five noteworthy rallies ended with breakdowns below the 10 and 20-day MAs. So, if the yellow line doesn’t hold, history suggests the orange line won’t hold either.

Diligent risk management

A prudent strategy is to place your stop-loss order slightly below the 10-day MA to avoid false breakdowns while reducing the chances of a larger decline.

However, please note that as the 10-day MA rises, the stop-loss order must be adjusted higher to reflect the rising 10-day MA support that should occur in the days ahead.


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