The world's largest e-commerce retailer, Amazon.com (NASDAQ :), is expected to report first quarter earnings on Thursday, April 29. Expectations are for a whopping $ 9.49 earnings per share, nearly double that year-over-year figure, at $ 104.49 billion in revenue – a 35% increase from the same quarter last year.
Amazon has taken advantage of the pandemic environment that has plagued other retailers as trapped shoppers turned to the technology giant for a range of products they could buy from home. Some might say it goes without saying that the Seattle-based company would show significant improvement in recent quarters. But Amazon may be in a store class on its own.
As a company, the e-tailer excelled in the stay-at-home environment, not only because of its deep-seated position as a retail powerhouse, but also because of its growing versatility into other areas, such as the cloud through Amazon Web Services as well as streaming entertainment and artificial intelligence. Given the shift in its business structure, Amazon will grow its business exponentially through its cloud segment alone.
Indeed, the company has a history of not only blowing them out of the water, but seriously. Will this pattern persist? Investors seem to think so.
AMZN Daily
The stock completed a falling flag, bullish after a 10 out of 12 day advance in which the price rose 14.5%. That's more than a full percentage per day over a two-week trading period, which occurred after the stock hit rock bottom.
The flag is a market catapult. It is a period when early bulls – after the steep previous movement – make money to take a breather and new bulls take over. To confirm that the recent congestion contained the dynamics of a falling flag, we look for additional clues on the map.
This type of flag is a pattern that tends to develop in the middle of a rally and the preceding bottom supports that view. We also note that the flag evolved after breaking the current rising channel, suggesting that it had survived that escalation rate and is now moving on, using it as a floor to bounce on.
We can also see a larger picture appear if we look at it longer.
AMZN Daily TTM
The flag, a market mechanism to pick up momentum, was needed to release the price from a range since its all-time high in September. The RSI shows the momentum is supporting the price floor, which has been on an upward trend since the bottom of March, as well as an upward break through the entire range.
Rumors that surfaced late Monday of a stock split in the Amazon drew a lot of attention along with the question of what fueled the option betting of another rally. Call volume yesterday at about three times the number of places, according to Optimize Advisors CIO Michael Khouw on CNBC.
Splitting up the megacap technology company's expensive stocks is expected to increase its market share as more retailers and investors can afford it.
While we don't know if Amazon will exceed expectations tomorrow, even if it will be picky investors, we may not be impressed enough with the results. Still, the longer-term future looks very bright for Amazon's stock, regardless of the immediate economic environment. the April 13, high at $ 3,432, and then for a return move that finds support above the flag before committing to a long position.
Moderate traders would be content with a downturn they would consider a buy dip.
Aggressive traders could enter at will, provided they have a plan that justifies the added risk of trading for the rest of the market, perhaps prematurely.
Here is the basic setup for a plan:
Trade Sample
Entry: $ 3,400
Stop Loss: $ 3,350
Risk: $ 50
Target: $ 3,800
Reward: $ 400
Risk: Reward Ratio: 1: 8
Author's Note: This is our interpretation based on historical behavior. We do not have a time machine and cannot say what will happen in the future. Our analysis may be wrong.
Even if it is correct, if you rely on statistical results, the same result is not a given every time. And even if the stock followed its statistical pattern this time around, this trading monster could still fail.
The goal is not for every individual trade to be a winner, but rather for there to be more wins than losses over time. The better you are at money management and know how to adjust that to your timing, budget and temperament, the more likely you are to be on the side of the metrics. Until you learn how to develop that skill, you can use our examples, but only as a learning tool. If you hope to make a lot of money, like most retailers, you will run out of money and be convinced that trading is gambling.
In fact, without the necessary knowledge, you are the gambler.
