Amazon Stock May Have an Achilles' Heel in One Key Indicator

Right now, Amazon (NASDAQ: AMZN) should be on top of the world. It's just come off a holiday season that was downright explosive and now stands as the tip of the spear for a fundamental change in the way Americans shop for Christmas presents, not to mention Hanukkah, Kwanzaa, birthday, and anniversary presents, among others. Yet there are some signs of potential trouble ahead, and one report from Miller Tabak chief market strategist Matt Maley suggests that Amazon's rocket sled to the top may have one potential Achilles' heel in the making.

History Itself May Be Against Amazon

Maley's report notes one key point that could mean trouble ahead for Amazon stock: its 200-day moving average. To be fair, that particular trend already got bucked once. Last week, the company did break clear of that average, but Maley suggests that the moving average suggests Amazon may actually be “overbought” right now, with a significant possibility of a pullback—or as he terms it, a “breather”—to follow.

Maley goes so far as to note the last two times Amazon looked this overbought, there was a pullback in share price. When—or perhaps if—that pullback actually hits, Maley notes, he'll be looking to that 200-day moving average once again for insight on what is likely to follow. If the pullback takes it below the average, then Amazon's troubles may be just beginning. If it bounces back from the trend line, however, then there could be one seriously explosive upside to follow.

Not Surprisingly, Not Everyone Agrees

While Maley's projections are rooted in statistics—commonly one of the most sound of arguments—there are some extenuating circumstances that cast doubt on Maley's notion. Federated Investors' portfolio manager Steve Chiavarone notes that this year, the consumer has been strong, and there are few if any signs that 2020 won't look similarly bright for everyone out to make a few purchases next year.

After all, Chiavarone noted, look what happened with “Super Saturday” sales figures that turned out to be even better than Black Friday figures, and this in a shortened holiday shopping season besides.

Just to round it out, Amazon has already seen its stock perk up around 25% for the year, and last week's hefty bounce to Amazon shares sent the company on a track out of the trading range it had occupied for five months beforehand.

So What About 2020 For Amazon?

Maley's projections have a solid basis in fact behind them. That much is clear. Yet those who dispute Maley's projections have a solid basis in fact as well; there are some extenuating circumstances here that make a simple look-at-the-chart projection look a bit too, well, simplistic.

Amazon has absolutely made a name for itself as the place to shop online. I personally found that out this Christmas, where I picked up items that could be found nowhere else in my area, including an unusually-sized pair of shoes and hard candy from a brand at least 70 years old. However, as our own recent reportage found, there are places besides Amazon to shop, and some of their stock is looking rather attractive.

Amazon has some significant edges going forward. It's built enormous name recognition. It's never been afraid to try new things. It's diversified extensively—just ask anyone who's running Amazon Web Services, or streams video from Amazon Prime—and it's got the support of investors.

Yet Amazon isn't without its own issues. The recent troubles between Amazon and FedEx, for example, have likely left some wondering if Amazon's impressive delivery speeds will continue to be as impressive going forward. Nike's divorce from Amazon as a primary sales channel may not have much effect, but for any fence-sitters, it could be one more indicator pushing a profit-taking sale.

Lastly, let's not forget the resurgence of the brick-and-mortar lineup, who have discovered that the massive network of stores built over the years can also serve as delivery points for customers, undercutting even Amazon's prodigious speed in the market. Target has made great strides on that front, to the point where some were even suggesting it could be the new “king of the internet.”

Online shopping is likely to stay, as long as there's an online to be used. The value of convenience should never be underestimated, and increasing numbers of shoppers are finding that staying out of stores on Black Friday isn't a bad plan overall. Amazon will certainly benefit from this move, but it's got to innovate just as hard as anyone else in order to hold its position in the face of oncoming competition. While the 200-day moving average suggests there may be problems, there's a lot going into those last 200 days that needs to be considered as well.