November 3, 2017
Amazon (AMZN) soared 13% last Friday on more than five times average volume following the company’s earnings announcement.
What I like: I learned long ago never to underestimate a big, liquid growth stock that gaps up more than 10% to new highs following earnings, which is just what Amazon did. I also like that the stock has so far held and even built on those gains, and the stock’s relative performance (RP) line—which compares the stock’s action to the S&P 500—also hit a new high. And, of course, the fact that revenue growth accelerated sharply and earnings crushed estimates (and caused analysts to hike their numbers) is a plus.
Any potential problems? Only that AMZN is well loved, and before the gap, the stock looked very iffy, building what could have been an intermediate-term top. It’s also not the most volatile stock (percentage-wise), so I wouldn’t expect a mega-run from here.
My take: There are never sure things, but the power and size of the gap and the action since, combined with the overall bull market, tells me AMZN has a good chance of heading higher and notching solid (though not spectacular) gains. It’s buyable around here (just buy fewer shares because of the high price) with a stop near 1,040.