×

Amazon is one of the most vulnerable stocks: Technician

Amazon has been having a great year compared to the rest of the S&P 500, more than doubling in stock price as the index's second-best performing stock. But with broader market negative on the year, one technician says the e-commerce giant's impressive gains may be winding down.

Chris Verrone of Strategas Research said that given the fact Amazon is well above its 200-day moving average compared to the rest of the market, the stock is primed for a pullback.

"We think it's time to take some profits here," Verrone said Monday on CNBC's "Trading Nation." "Historically, when we go through these market corrections, it's the leaders that tend to get hit last, and by extension, we'd look at Amazon as one of the more vulnerable names."

Read MoreThis commodity is in an 'epic bear market': Trader

Currently, Amazon is about 30 percent above its 200-day moving average, Verrone said. Meanwhile, more than 80 percent of analysts who cover the stock have a buy rating on Amazon. Verrone said the broad consensus indicates the popular name may be stretched in terms of stock value.


On Monday, Amazon shares jumped almost 3 percent to $658. Verrone said support for the stock comes in at $625, a 5 percent drop from where it closed Monday. If shares break below this key support level, an even deeper pullback may be in store, he said.

However, Erin Gibbs of S&P Investment Advisory said she expects Amazon's growth to continue, as November retail sales numbers suggested strong consumer spending especially in online retailers. Gibbs also pointed to high analyst price targets as a positive sign for the stock. Analysts have an average price target of $738, according to FactSet.

"Amazon looks to be set from the overall economy, on top of the fact that they really killed it in the third quarter," Gibbs said Monday on "Trading Nation." "For me this is not the time to get into it as a short."

Want to be a part of the Trading Nation? If you'd like to call in to our live Wednesday show, email your name, number and a question to TradingNation@cnbc.com.

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect