Hello traders and investors! Let’s study AMZN today!
The stock was crushed after earnings, and it is not reacting. So far, we don’t have any bullish structure around that could reverse this bearish momentum.
AMZN did a Monster Gap after earnings and it lost 3 supports at once: The 21 ema; the 3,552.80 (previous resistance); and the 3,394.18 (previous support). Now it is just heading to the next support, at the red line ($ 3,127.37).
Since we are far from the next support (we would need a drop of more than 4% to hit there), it is possible to see a good reaction before that, maybe around the 21 ema in the weekly chart:
However, it is true that despite the earnings, AMZN is cheaper than ever. When we look at its Price/Earnings ratio, now it is at 57, the lowest point in history (when positive, of course). Its diluted EPS is also incredible, more than 3x Q1 2020. All of this means that AMZN is getting cheaper, not because of the recent crash, which was nearly insignificant, but because the company is creating value.
What’s more, AMZN has a quite weird business model, as it is almost everyone’s rival. Despite the common belief that AMZN is just a tech retailer company, this is not entirely true. Usually people believe that AMZN’s rivals are COST or WMT, but AWS is the main source of income for AMZN, so technically, GOOG and MSFT are its main rivals.
- AMZN Operating income in North America: $ 3,147 million; - AWS Operating income: $ 4,193 million; - AMZN had a loss internationally.
All of this reflects on the charts. The relationship between AMZN, COST and WMT is almost nonexistent, despite being in the retail sector too.
It is interesting to notice that AMZN is still one of the most expensive FAANGs, being FB the cheapest, in my view. Nevertheless, the company is growing nicely, and given its nature, maybe it’ll never be among the cheapest stocks.
Amazon is a great company, and a crash like this might be just an opportunity, but ultimately, the charts will give us a good entry point, as usual. Let’s calmly wait for a technical entry point.
If you liked this analysis, remember to follow me to keep in touch with my daily updates, and support this idea if you liked it.
Additionally, today's low partially filled a gap left between 6/7-6/8, and the low falls within the 3 trading days mid month where important highs/lows are made, as well as 1st 3 trading days of month. This will give from all-time high to low (gap under 61.8% test) both mid successive months. Coming above 3337.70 (8/11's high) more than equal weight in the opposing direction, and bullish at least for a significant countertrend rally or better.
pechi123
⋅
It has slightly exceeded the 61.8% (3221.82) @ 3211.13 low so far but is above 3182 (wave 1 high), this is the important area to see a low take place at least on a countertrend basis.
pechi123
⋅
From the 2881 low to 3773.08 high it has already exceeded the 50% retracement, has come close to the 61.8% @ 3221.82 (today's low 3269.67), and into an area of former natural chart resistance perhaps becoming support. At your red line 3127.37 it would exceed the 1st wave high 3182, be an Elliott Wave rule violation for a 4th wave, and basically mean that a larger correction to 2 degrees of trend was taking place that would result in much lower prices under your red line that would be immensely bearish for the NDX sending it towards the March 2020 lows. Given the readings of put/call ratio, the SKEW index, and VIX/VXN that the indices are heading much lower is low probability, because there is excessive speculation to the downside. Therefore, if the 61.8% level holds, at it may have given the reaction to today's low, coming above yesterday's high 3337.70 might mean a low is already in place. However, the gap down into 7/30 is large, within that gap is natural chart resistance 3500-3550. Ultimately if bullish then it must come over the high preceding the gap down at 3637.95. Until then it is possible that it will rally into the gap, but not close it because of said resistance. There's much work needed in AMZN to re-establish the bullish case.