Despite Massive YTD Run, AMZN Remains Very Compelling; Could Hit $1,000+ Or At Least Out-Perform AAPL Significantly
AMZN has had an amazing run since bottoming at <$300 in early 2015, having ripped ~135% higher in the process. Despite this run, the charts for the stock, both on an absolute basis and relative basis vs. nearly anything else you might consider comparing it to, especially AAPL, look very bullish and poised for some type of blow-off move higher.
Here’s a straight-up AMZN chart. Long-term AMZN has been caught b/t the ascending triangle pattern of lines (1) and (3); (1) has been support and (3) resistance. It’s run from <$300 in early 2015 began as it bounced atop line (1) support. Subsequent to bouncing there on its way to $675, it blew through its 423.6% Fib expansion level formed off the stock’s 1999 high and 2001 low, per the red shade. It successfully re-tested that Fib expansion level as new support earlier this year. Subsequent to that, it made a more recent push above line (2) resistance; this represented cyclical highs for the stock in 2004, 2007, 2011 and 2014. This week it is successfully re-testing line (2) as new-found support, bouncing nicely atop it. Moving forward, there’s simply no resistance on the chart left until line (3). Depending on when it hits line (3), should it get there, it implies the stock could run to ~$1,000-$1,200. This is a very bullish chart and in my mind, a fairly easy one to buy with a simple stop some % below the line (2) support the stock is bouncing off of this week.
Here’s AMZN vs. AAPL. I really like this chart and long AMZN vs. a short in AAPL looks very compelling here as AMZN is breaking out on a relative basis from both line (1) and (2). Line (1) is 15 years old and line (2) is a decade old! This spells a lot of trouble for AAPL as its own chart looks bearish on an absolute basis. Regardless, a great looking chart for AMZN.
This has important implications for the broader averages. If the SPX is to stay bid, the mega caps need to continue holding up. Thus, if AAPL is to come under pressure, the capital can’t just exit equity-land, it needs to find an equity vehicle that is just as large and liquid, not to mention in a similar industry space to keep relative weightings vs. the broader market in check. AMZN would be the perfect home and beneficiary of rotations out of AAPL to keep the overall SPX bid if that’s what needs to happen from a policy standpoint. Buy AMZN, short AAPL.
And finally, in the chart below, the ratio of the DJ Internet Index vs. SPX is breaking out of a decade long channel. AMZN is a component of this index.
My favorite trade based on all the charts above is a simple spread long AMZN vs. short AAPL.