The Amazon share price was lower by 2.5% as the retreat from highs near $2,550 continues. The technical pattern on the weekly chart suggests the potential for further losses. I said in my last Amazon article that, “A move lower will test support at the $2,900-3,000 level on the stock.” The price is now testing the $3,000 level today.
News this week suggested that the company is planning to open 1,000 small delivery hubs in cities across the U.S. in a bid to bring products closer to customers. These mini versions of its delivery fulfillment centers would allow the company to challenge the likes of Walmart. Amazon is also planning to hire a further 100,000 staff to help meet current demand.
In its recent earnings release, the company announced a huge beat on earnings of $10.30 per share versus expectations of $1.46, on revenues of $88.9 bn which was higher than the $81.5bn expected. The company may find it hard to top that in its coming quarters due to rising staffing costs, the re-opening of retailers, and capital costs. This may take some near-term steam out of the current share price.
After it was reported this week that Facebook could face an antitrust action by year-end, Federal Trade Commission investigators have also started interviewing small businesses that sell products on Amazon’s website, to determine whether the retail giant has been using its market power to hurt competition. This is another headwind for the company’s stock and at a forward price-earnings ratio of 70x, it might be a good time to look for a correction before buying.
The Amazon weekly chart shows a failure at the channel resistance. The stock is falling again this week and there is little support to the $2,400 level. Investors should look for a buying opportunity on the stock near those levels. A close above $3,200 could reverse the negative trend but the wedge pattern would favour the downside. The Investing Cube team is available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
