Amazon.com, Inc. (NASDAQ:AMZN) stock Is at Critical Support Levels

Amazon.com, Inc. (NASDAQ:AMZN) stock Is at Critical Support Levels

Amazon.com, Inc. (NASDAQ:AMZN) stock Is at Critical Support Levels

In recent weeks, Amazon stock went on a record eight-day losing streak that saw it drop over 10% after a slight earnings miss in EPS. The decline included a 6% drop alone in the week ending Aug. 2 when Jeff Bezos sold nearly $3 billion worth of the company’s stock.

But when we’re talking about a company that’s worth nearly $1 trillion, I’m not that worried about a 10% move. The stock broke its losing streak closing up just over 1% on Tuesday to close at $1,787.83.

However that’s not to say there’s no reason for at least a little concern. A look at common technical indicators suggests that analysts are taking notice of the potential headwinds that Amazon faces.

As of this writing, Amazon’s stock was crossing below 14 out of 17 common moving averages. Recently, Amazon dipped below its 200-day and 320-day moving averages after spending the better part of two quarters above the trend line.

If you’re buying Amazon stock, be aware of these potential long-term challenges.

Third-Party Retailers Are Already Feeling the Pain

A recent report from Bloomberg cites that some Amazon sellers are being affected by the current tariffs. If the Trump administration makes good on its threat to increase tariffs on most Chinese goods by 10% on Sept. 1, 2019, many more retailers, who lack the negotiating power of large companies, will see increasingly high import costs.

This gives these retailers three unappetizing options:

  • They can pass the cost along to consumers.
  • They can eat the cost – and the accompanying profit.
  • They can forego selling those particular goods – and lose the corresponding revenue.

Of these options, passing along the cost is the most likely route.

The Amazon Algorithm Makes It Hard to Raise Prices

However, passing along the cost to consumers is not a decision these retailers can take lightly. The retailers need to keep their products at a certain price to stay high on Amazon’s search rankings. A drop in rank puts them at risk of losing sales, and a lost sale means Amazon does not collect the associated commissions and fees.

Amazon has recently said it will compensate some retailers up to 10% to make up for the tariff. But this would only apply to sellers who buy products wholesale to sell on Amazon’s site. Other sellers will bear the cost or pass it along to the consumer, and that is why I think AMZN’s stock is likely to be a bit choppy for the rest of 2019. Many sellers are caught between a rock and a hard place as they try to figure out a holiday sales strategy that assumes the new tariffs that will be in place. Although Amazon is seeing strong growth in its subscription business which is helping diversify its revenue, it is first and foremost an e-commerce business. Shareholders anticipate a strong holiday season as part of assessing the company’s value.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 1,862.94.

The projected lower bound is: 1,707.29.

The projected closing price is: 1,785.12.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 5 falling windows in the last 50 candles–this makes the current falling window even more bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 66.0911. This is not an overbought or oversold reading. The last signal was a buy 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 33.72. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 3 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -76. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 16 period(s) ago.

Rex Takasugi – TD Profile

AMAZON COM closed down -22.660 at 1,784.920. Volume was 100% below average (consolidating) and Bollinger Bands were 78% wider than normal.

Open     High      Low     Close     Volume___
1,795.9901,800.9801,777.0001,784.920 593
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1,821.56 1,895.04 1,750.57
Volatility: 29 27 44
Volume: 3,928,811 3,596,879 5,185,666

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

AMAZON COM gapped down today (bearish) on light volume. Possibility of a Common Gap which usually coincides with a lack of interest in the security. Common Gaps are fairly irrelevent for forecasting purposes. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
AMAZON COM is currently 2.0% above its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect moderate flows of volume out of AMZN.O (mildly bearish). Our trend forecasting oscillators are currently bearish on AMZN.O and have had this outlook for the last 9 periods.

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