If you are a shareholder in Amazon, you deserve a pat on the back. You bought a company low, and now you are reaping the benefits of your risk-taking. All told, Amazon (NASDAQ:AMZN) jumped up more than $80 from its January 15 to February 15 lows. It’s quite a bit of an appreciation. In fact, if you bought Amazon when it dipped around the beginning of February, you would have made 30%. That is an amazing return.
Whenever you get an amazing return like that it’s always a good idea to start thinking about heading for the exit. Of course, you shouldn’t head for the exits and lock in your gains automatically. You need to pay attention to the underlying trajectory of the stock and determine whether the stock has a lot of upward potential left to go.
Unfortunately, considering how Amazon stock typically performs, it’s probably not a good idea to hang on to those shares, especially if you enjoy that 30% run-up. The reason for this is if you look at Amazon’s stock chart for the past 52-week period, it shows a very clear seesaw pattern. Amazon would hit a high and then start trending really low, almost down 30%, and then it would trend higher again and then trend lower, so on and so forth.
If you believe that there’s a lot more upside for Amazon, then by all means you should hang on to your stock. However, if you are looking for long-term gains on a year over year basis, now might be the time to sell. Why? In the past twelve months, Amazon has really only managed to gain 5%.
I would suggest that if you’re looking for short-term gain, and you see other momentum stocks out there; it’s time to dump Amazon shares. Not that I’m saying that Amazon stock is no good. I’ve already laid out the reasons why I think it’s a great long-term buy. However, if you are looking for short-term gains, now is the time to sell. Wait for the stock to drift lower again and buy at that low point.