Amazon Nears $1,000 Mark. Is it Overbought?

Amazon.com, Inc. (AMZN) is rapidly approaching the $1,000.00 per share milestone that would put its market capitalization at close to half a trillion dollars.

While the company surpassed analyst estimates during the first quarter, it’s rapidly approaching overbought levels from a technical standpoint, which could lead to some near-term consolidation. The upshot is that the trend remains decidedly bullish for long-term investors and traders should maintain a bullish bias in their trades.

The company reported first-quarter revenue that rose 22.5% to $35.7 billion—beating consensus estimates by $400 million—and earnings per share of $1.48—beating consensus estimates by $0.35. Amazon Web Services (AWS) continues to be a significant driver of financial results with sales jumping 43% year-over-year to $3.66 billion, despite growing competition from Microsoft Corp.’s (MSFT) Azure, Alphabet Inc.’s (GOOGL) Cloud Services and similar service providers.

From a technical standpoint, the stock is approaching trend line resistance at the upper end of its price channel after breaking out from R2 resistance at $984.79. A relative strength index (RSI) reading of 74.60 suggests that the stock may be overbought and experience trouble breaking through the resistance levels. However, the moving average convergence divergence (MACD​) remains bullish and suggests the long-term trend remains higher.

Traders may want to watch for some near-term consolidation near the $1,000.00 level given the overbought nature of the stock; however, the long-term trend remains higher. The company expects second-quarter revenue to be between $35.25 billion and $37.75 billion with operating revenue between $425 million and $1.075 billion — slightly lower than consensus estimates, but the company tends to beat its own estimates.

Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively-managed index funds.

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