The tides may have turned for one of 2015's hottest stocks.
Amazon was one of two S&P 500 stocks to double in value last year, second in performance only to Netflix. But according to Rich Ross of Evercore ISI, the high-climbing name could now be in for a very hard fall.
So far in 2016, Amazon shares have dropped 15 percent, underperforming even as the S&P 500 has tumbled 8 percent year to date. Now the popular stock is approaching a very important level of support at its 150-day moving average, Ross said.
Both the 150-day and 200-day moving averages are levels of support that have held throughout the past year, Ross pointed out. A test of the 150-day moving average would bring Amazon's share price down to $563, a 2 percent drop from the stock's close on Tuesday at $574. A break below that would result in a test of the 200-day moving average at $520, Ross said.
"It sounds like a lot, but when we look at the chart, given the magnitude of this 125 percent move in conjunction with the false breakout to a fresh new high and the volatility in the broader market, another 10 percent on a break below 150-day is really not unreasonable," Ross said Tuesday on CNBC's "Trading Nation."
If the $520 level of support does not hold, Amazon could go as low as $500 per share before finding a bottom, Ross said. That would mean another 13 percent plunge from Tuesday's closing price.
However, Ross doesn't necessarily see that deep of a drop as the most likely scenario.
"In the meantime, the trend is still higher despite this pullback and we continue to hold the moving average which is defined support throughout the advance," he said Tuesday. "In the absence of a break below that level, we would expect to continue along that trend."
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