Amazon.com (NASDAQ:) fell sharply after reporting results last Thursday. Although third-quarter sales and earnings were in line with expectations, weak sales of high-margin cloud services disappointed investors. Amazon Web Services sales were $20.5 billion, lower than the $21.1 billion estimate.
In other words, the cloud computing unit’s growth fell to 27.5%, well below the 32% forecast by analysts, its slowest growth since the company began reporting on the company’s financials. this section. Additionally, Amazon provided a weak forecast, warning that fourth-quarter annual growth will fall 6% to 8%, and revenue will be between $140 billion and $148 billion, down from the 155.15 billions of dollars expected.
Amazon’s woes are part of the challenge for big tech companies after the economy went into a technical recession and is heading into a full recession that even politicians won’t be able to deny.
So is Amazon a buy after losing 48.25% since its all-time high in July 2021? Fundamental analysts think so. TipRanks provides an average price target based on 33 analysts of $141.31, reflecting a 36.65% gain from the current price of $103.41. However, fundamental analysts’ targets are within a 12-month time frame. They do not claim to know when their goal will be achieved. So even if they’re right, at some point in the next 12 months, they’re not necessarily claiming that the stock won’t go down first.
Now, let’s look at the technical approach.
Price completed another continuation type H&S. The $40 height of the model implies a target of $65. If all the interest invested causes a chain reaction for another 38.5% drop, the stock will have crossed another uptrend line from the January 2015 low.
The next significant support could be the December 2018 low of $65. That is correct. The H&S continuation pattern coincides with the December 2018 low, providing technical support for a fresh uptrend. However, if the accumulation fails, the next support will be the uptrend line from the 2008 low, currently at the $30 level.
Trading strategies
- Conservative traders should wait for price to retest the neck line of the H&S continuation pattern and demonstrate continued resistance.
- Moderate traders should wait for a move back for a closer entry if this is not confirmed.
- Aggressive traders can sell short at will, depending on their strategy.
Examples of short trades on Amazon stock:
Aggressive
- Admission: $103
- Stop-Loss: $108
- Risk: $5
- Target: $68
- Reward: $35
- Risk-reward ratio: 1:7
Moderate
- Admission: $108
- Stop-Loss: $110
- Risk: $2
- Target: $98
- Reward: $10
- Risk-reward ratio: 1:5
Conservative
- Entry: $105 (after retesting at $108)
- Stop-Loss: $110
- Risk: $5
- Target: $90
- Reward: $15
- Risk-reward ratio: 1:3
Warning : The author has no position in the instruments mentioned in this article.