Watch These Amazon Price Levels as Stock Drops on Cloud Revenue Miss, Tepid Sales Outlook
Key Takeaways
Amazon (
AMZN
) shares lost ground in extended trading on Thursday after the tech giant reported
cloud computing
revenue below expectations and issued a
tepid outlook
for the current quarter.
While the company’s
Amazon Web Service (AWS)
cloud unit revenue grew 19% in the fourth quarter to $28.79 billion, it came in below the $28.87 billion expected. CEO Andy Jassy told investors on the
earnings call
that the unit’s growth had been held back by the inconsistent flow of chips from its third-party partners.
Looking ahead, the company’s revenue forecast for the first quarter also fell short of Wall Street expectations, with executives saying the outlook reflects a significantly unfavorable impact from
foreign exchange rates
.
Amazon shares have gained roughly 9% since the start of the year as of Thursday’s close and trade more than 40% higher over the past 12 months, handily outpacing the
S&P 500
’s returns of 3% and 23%, respectively, over the same periods.
Below, we take a closer look at Amazon’s chart and use
technical analysis
to identify key post-earnings price levels that investors may be watching.
Rising Wedge in Focus
Amazon shares have trended higher in a
rising wedge
since July last year, with the price finding support multiple times near the pattern’s lower trendline and
50-day moving average (MA)
.
During recent trading sessions, the stock has traded towards the wedge’s upper trendline but was unable to stage a decisive
breakout
ahead of the company’s quarterly results.
Moreover, as the shares set a record high earlier this week, the
relative strength index (RSI)
failed to also register a new high, creating a bearish
divergence
between the price and indicator, a technical signal pointing to waning buying momentum. Indeed, Friday’s projected lower open sets the stage for a possible retest of the rising wedge pattern’s lower trendline.
Let’s identify three key
support levels
to watch and also point out a measured move
price target
to monitor if the stock resumes it longer-term uptrend.
Key Support Levels to Watch
Firstly, it’s worth keeping an eye on the $230 level. Although the stock is projected to open slightly below this price on Friday, the area may attract buying support near the rising wedge pattern’s lower trendline.
The
bulls
’ inability to defend the above level could see the shares slip to around $216. This area on the chart may provide support near the November
peak
and January trough.
A more significant correction brings the
psychological
$200 round number into play. Investors could seek to
accumulate
shares in this region near the early July
swing high
and late November
swing low
, an area which also sits in close proximity to the upward sloping
200-day MA
.
Measured Move Price Target to Monitor
Investors can forecast a price target to monitor if the stock resumes its longer-term uptrend by applying the measured moved technique, also known by chart watchers as the
measuring principle
.
When applying the method to Amazon’s chart, we calculate the depth of the rising wedge and add that amount to the pattern’s upper trendline. For example, we add $50 to $240, which projects a target at $290, a level where investors may consider
locking in profits
.
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As of the date this article was written, the author does not own any of the above securities.
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