On Thursday, during the company's earnings call, Amazon founder and CEO (NASDAQ :), Jeff Bezos, told shareholders to "take a seat" because he warned about the e-tailers in five years . In response to the results, investors sent their own message to Bezos: they removed $ 83 billion of the company's valuation by selling shares.
While the Seattle-based internet giant saw sales increase by 26%, in part due to COVID-19 lockdowns moving retail to online sites as stores and malls closed for fear of viral spread, the company also announced that it will spend more than $ 4 billion in corporate profits until June to protect workers from the corona virus, and thus the losses.
For the cynic, this can be characterized by a brilliant PR movement in which the giant technology company wants to save face, after, on April 24, an appeal against a previous lawsuit in the French legal system – in which workers claimed the Amazon had not done enough to keep them safe while working – came back in favor of the workers. Among other things, the decision called on Amazon to stop delivering non-essential items to France.
On the other hand, we are impressed with the move, not only because it is moral, but also because it provides economic stamina. While other companies fired or fired employees – for more than 30 million employees in the US – Amazon even looked for a job, with a breathtaking 175,000 employees. This seemingly counterintuitive step was made to allow the company to keep up with the additional demand from customers who were hiding at home and unable to view physical stores.
We think some investors didn't see the big picture or just lost patience with the stock. Amazon shares fell 7.6% from the end of Friday.
In our opinion, the share could now decline further. We don't yet know how much President Donald Trump's influence has affected the overall market outlook, or how successfully the company has moved production out of China since last year's trade war. For the time being, we look at the short to medium term, based on the technical aspects.
Friday's sale resulted in one of two things:
(1) The failure of the pennant, a continuation pattern (along the solid lines) and therefore bullish after the April wave. This already completed itself on Thursday, with an upward outbreak, showing that demand had absorbed all available supply within the pattern and now increased bids to find new, willing sellers at higher prices.
or
(2) The beginning of a widening pattern (along the dotted lines), which is bearish because it develops amid emotional trading, without market leadership.
Either way, a failed bullish pattern or a reversal pattern both become bearish.
The only difference is that in the first scenario the downward outbreak already occurred, while it still formed in the second scenario. Also, the uptrend line has continued to support since the bottom of March, although both the RSI and MACD have turned peaks, suggesting prices will move through the uptrend line.
Does this analysis correspond to that, when we discussed a rising triangle of seven and a half months, a bullish pattern? It actually fits perfectly.
In that post, our analysis suggested that the stock would eventually go up, but bulls are waiting for better imports. That was going to happen.
The current reversal is the make-up for a return to the $ 2,000 level to retest that bullish pattern. Unless the market changes dynamically in the meantime – and we don't consider money spent to ensure continuous service amid a bloodbath in the COVID-19 company, other than an investment that also boosts morale and efficiency. the company is promoting – the $ 2,000 level should provide solid support, allow for a new upswing.
Trading Strategies
Conservative traders would wait for a return to $ 2,000 and wait for accumulation as evidence that the market structure remained intact.
Moderate traders can wait for the withdrawal, for that better import, but not necessarily for the evidence of trend.
Aggressive traders are likely to short-circuit the stocks, provided they understand that if the current pattern is in fact a broadening formation, the stocks can revisit their peak, for $ 2,500, even if they stay lower from there. To avoid being whipped, they may want to wait for a closure below the upward trendline.
Trading Example: Short Position
Entry: $ 2,280
Stop-Loss: $ 2,330
Risk: $ 50
Target: $ 2,080
Reward: $ 200
Risk: reward ratio: 1: 4
