Amazon Just Did This—and It Didn't End Well Last Time

Key Points

• Amazon’s ongoing drop just triggered a rare RSI swing from extremely overbought levels to near-oversold levels in just two weeks - the last time this happened, the stock fell 35%.
• However, the company’s fundamentals, analyst support, and diversified growth engines are all as strong as ever.
• If there is to be a similar drop this time around, then it would be another golden buying opportunity. 

For a stock that hit a fresh all-time high as recently as the start of November, it may come as a surprise that there’s a bearish argument at all calling for a sell-off.

But despite shares of Amazon.com Inc NASDAQ: AMZN having popped into blue sky territory after their earnings at the end of October, they’ve been selling off over the past fortnight, and that’s exactly where we are. 

Having tagged an all-time high close to $260, they opened Tuesday, Nov. 18's session around the $230 mark, meaning they’ve given up more than 10% and almost all of their post-earnings gains. Yet the really eye-catching part isn’t the price action, it’s what the RSI just did and what it might mean. 

A Rare RSI Crash

To the long-time MarketBeat readers who have seen us praising Amazon’s execution and highlighting its long-term growth potential in recent months, fear not. The upside story remains intact; it’s just that something interesting has occurred in its chart that’s giving pause for thought, in the short term at least; the stock’s Relative Strength Index (RSI), a popular indicator for telling how overbought or oversold a stock is, has just swung from above 70 to below 50. 

In other words, the speed and one-directional nature of the sell-off this month has been such that the RSI has swung from being extremely overbought to almost on the oversold side of the fence. It means the bulls have all but thrown in the towel, and the bears are firmly in control - not something you would expect for a company that just smashed analyst expectations a few weeks ago. 

Normally, this kind of thing wouldn’t even be that noticeable. But at a time when tech valuations are being questioned wholesale, especially those who have exposure to the bubbling AI market and associated cloud computing industry, it does stand out. That’s because the last time this happened, that is, Amazon’s RSI swung from being above 70 to below 50, was in December of last year—right before shares began a 35% slide that didn’t bottom out until April. 

Why the Bears Don’t Have Much Else

The bears are sure to latch onto this as a foretaste of what could be coming, but the reality is that’s about all they have going for them. And, were Amazon to sell off that much, it would be an even greater buy-the-dip-opportunity than what we flagged the other week.

This is a stock that has multiple revenue engines, is reporting them to be firing on all cylinders, and is consistently rated a Buy by analysts who see nothing but upside. Some of the more recent updates include those from the likes of Mizuho, President Capital and Loop Capital, the latter of whom just set a new street-high price target of $360. 

From where shares were trading early on Tuesday, Nov. 18, that’s pointing to a targeted upside of more than 50%—not bad for a $2.5 trillion company. That kind of potential return on a company this size only happens when the growth engines are not just intact but accelerating. Last month’s report showed that AWS is growing 20% year-over-year, its advertising revenue is increasing, and its margins are looking as good as ever. Nothing in the October print suggested any of those trends are slowing—this dip is, for the moment at least, purely technical and sentiment-driven.

NVIDIA’s Earnings Could Set the Tone

Investors should be watching closely to see how shares trade through the rest of this week, and almost as importantly, how the rest of the market trades. There are persistent jitters around this AI bubble, and the frothy valuations in the stocks are blowing it up. NVIDIA’s NASDAQ: NVDA earnings, due Wednesday, Nov. 19, will go a long way to calming, or exacerbating these. 

But either way, there’ll be an opportunity in play for long-term believers in Amazon. Either the bull run remains intact, and the stock will soon return to all-time highs, or it will take a well-deserved breather and sell off to levels that would-be investors would have only dreamed about a few weeks ago. Until something fundamentally changes in Amazon’s go-to-market strategy or its ability to execute, it remains one of the best mega-cap tech stocks to own going into 2026—period.