Amazon’s Momentum Spike: Why a “Hot” RSI May Still Favor the Bulls

Key Moments

Technical Setup: Overbought, Yet Potentially Constructive

Shares of Amazon.com (NASDAQ: AMZN) climbed more than 10% last week, accelerating a trend that has been quietly building for months. The stock has been forming a series of higher lows, signaling steady underlying demand even when headline gains were more modest.

As this latest advance has unfolded, Amazon’s relative strength index has attracted attention. The RSI moved up to 70 over the past week, a reading traditionally characterized as overbought. For many names, such a level might trigger caution or profit taking. In Amazon’s case, the broader context suggests it may be confirming a strengthening uptrend rather than warning of an imminent top.

Understanding RSI in a Strong Uptrend

The RSI is a momentum gauge that tracks the speed and extent of recent price moves. Readings above 70 are commonly labeled overbought, implying a stock could be vulnerable to a pause or retracement. Conversely, a reading at 30 or below is often interpreted as extremely oversold, hinting at potential for a rebound.

However, in sustained advances, RSI can stay elevated for prolonged periods as buyers repeatedly step in on modest pullbacks. When a stock is just moving into overbought territory, it can indicate that bullish momentum is firmly taking hold rather than signaling exhaustion. Based on the current pattern of steady accumulation and the recent surge, Amazon’s setup appears more aligned with this bullish interpretation.

Importantly, the recent rally does not appear to be anchored to a single news item or event. Instead, it reflects several weeks of ongoing buying interest and gradually improving sentiment, both of which support a constructive near-term outlook.

Earnings Calendar and Positioning Risk

The timing of the latest RSI move adds another layer for investors to consider. Amazon’s next earnings report is scheduled for release at the end of January. Historically, this period has not been favorable for bearish positioning, and there are indications that short sellers may be acting with increased caution heading into the event.

The company has built a reputation for strong performance leading up to and following earnings releases. Combined with an RSI reading that suggests bulls are firmly in control, the balance of risk and reward is tilting more favorably for those positioned on the long side.

Another contextual factor is last year’s share price performance. Amazon ended the prior year essentially unchanged, despite what were described as consistently solid results. The current advance is therefore not emerging from a backdrop of excessive enthusiasm. Instead, the market now appears to be repricing a stock that many investors may have underappreciated.

Analyst Backdrop: Price Targets Support the Trend

Amazon’s technical strength is being reinforced by strong analyst sentiment. Multiple firms are maintaining bullish ratings and price objectives above $300. With the stock still trading below $250, the implied upside from current levels remains substantial, suggesting that the path of least resistance continues to point higher.

This backdrop is significant when interpreting an overbought RSI reading. Such signals often take on greater meaning when fundamentals are weakening or when sentiment is excessively euphoric. According to the current setup, neither condition appears to be in play. Analysts remain optimistic, expectations for another solid earnings print are elevated, and the broader story around Amazon’s growth potential is described as intact.

In this environment, the RSI at 70 is less indicative of speculative froth and more reflective of capital flowing into the stock in greater size. Rather than serving as a warning sign, it may be confirming that a new leg of the rally has begun.

Market Structure and Strategy Considerations

Even with an increasingly favorable technical and fundamental backdrop, the advance is unlikely to move in a straight line. After a gain of more than 10% in a single week, short-term consolidations or minor pullbacks are always a possibility.

The broader implication, however, is that sellers have struggled to disrupt the multi-month uptrend. With the bears unable to break that pattern of higher lows, their influence appears to have diminished. Should the stock hold, or modestly extend, its latest gains over the coming sessions, it may prove challenging to build a convincing bearish case going into the earnings report in two weeks.

Snapshot of Key Metrics and Context

For investors assessing Amazon now, the combination of a rising RSI, persistent buying interest, strong analyst support, and an approaching earnings release suggests that the recent overbought signal may be better interpreted as confirmation of momentum rather than a reason to step aside.