Consumer spending, which accounts for 70% of U.S. GDP, rose at
a 1.7% annual rate in the second quarter. That's the weakest
annual pace since the third quarter of 2011. Remarkably, the poor
retail data has not dragged the indices lower, although this may
I have been an
buyer for a while. However, I fear that the shares have gone too
far without a proper correction, setting the stage for a massive
In May, ChartWatch noted that the shares were
ready to rally
. Later, I upgraded my
AMZN target price
After breaking out of a perfect wedge (blue lines) pattern, AMZN
nailed and exceeded the $252 anticipated target. The rally was
great, except that the shares did a poor job setting up support
zones along the way. AMZN needs a correction … and the next
pullback could be fierce.
This chart shows the price of
shares along with an important support area for you to
AMZN's first support zone is 10% lower at $235 - a level where it
consolidated during the first half of August. This level also
coincides with a rising 50-day moving average (orange line)
around $237, laying greater credence to this zone as an area of
It's likely the $235 zone will hold through October. However, the
next support area is substantially lower at $210, which coincides
with the rising 200-day moving average (in black).
From a fundamental viewpoint, it's hard to argue why AMZN
shares are this high. The stock trades at 317 times EPS. Its
forward P/E is above 109.
Though analysts slate EPS to expand by 208% next year, it's
likely to drop 46% this year. Such volatility in EPS is not
uncommon among small-cap stocks. However, AMZN is no small
potatoes, clocking in with a market capitalization of more than
Amazon.com is a wonderful business. However, the stock not only
appears stretched, it's grossly overvalued at the current price.
New buyers should wait until a decline down to $235 before
initiating a new position. Alternatively, sellers of the stock
can use the same price as their near-term target.
Equities mentioned in this article: AMZN.