Amazon.com, Inc. (AMZN) shares reached new all-time highs on Tuesday after the e-commerce giant announced that it would launch a health care company with JPMorgan Chase & Co. (JPM) and Berkshire Hathaway Inc. (BRK-A, BRK-B). While the initiative remains in the planning stages, the idea is for the member companies to leverage scale and expertise, as well as tech solutions, to provide affordable and transparent healthcare to their U.S. employees.
Even prior to the health care announcement, analysts have remained bullish on Amazon's potential over the long term. Morgan Stanley analysts increased their price target to $1,400 per share, citing Amazon's ad opportunity and higher-margin business models. Shortly after, Citi analysts reiterated their Buy rating and increased their price target from $1,400 to $1,600, calling the stock a "top pick" due to its ad opportunity and underappreciated potential. (See also: Amazon Near Big Pullback After 20% Gain: Piper Jaffray.)
From a technical standpoint, the stock extended its breakout to all-time highs and neared its upper trendline resistance. The relative strength index (RSI) moved further into overbought territory at 88.65, but the moving average convergence divergence (MACD) accelerated its bullish uptrend. These dynamics suggest that the stock could see some near-term consolidation, but that the overall trend remains bullish.
Traders should watch for some consolidation between $1,350 and $1,450 over the coming sessions given the lofty RSI reading. If the stock breaks down from $1,350, traders should watch for a move down to trendline support and the 50-day moving average at around $1,220.00, although a breakout from $1,450 appears more likely given the strong MACD momentum. Analysts are also likely to give their thoughts soon following the health care announcement. (For more, see: Facebook, Amazon and Alphabet Q4 Earnings Preview: Canaccord.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.