Asset Watch
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.
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.
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.
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.
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.