Amazon stock is getting smoked on earnings and is sitting on a key support area. Here’s what to watch.
It’s been a mixed quarter for FAANG stocks so far, but Amazon (AMZN) – Get Amazon.com, Inc. Report isn’t helping. The stock is down more than 12% in midday trading on Friday after the company reported earnings.
Apple (AAPL) – Get Apple Inc. Report is down slightly after wavering into positive territory shortly after the open, as it also reported earnings on Thursday evening.
Alphabet (GOOGL) – Get Alphabet Inc. Class A Report (GOOG) – Get Alphabet Inc. Class C Report dipped lower on its results and Netflix (NFLX) – Get Netflix, Inc. Report plunged. The only mega-cap tech stock that’s done well so far this earnings season is Microsoft (MSFT) – Get Microsoft Corporation Report and it’s not even part of FAANG.
Amazon stock is now hitting a two-year low after a surprise loss in the quarter. Even though the loss was driven by a write down on its equity investments (a $7.6 billion write down on its investment in Rivian (RIVN) – Get Rivian Automotive, Inc. Class A Report), a disappointing outlook sapped any momentum the stock might have had.
Had Amazon impressed investors with its outlook for next quarter, then they likely would have overlooked the negative earnings headline.
Seeing the stock probe its lowest level since June 2020 is not inspiring. It also adds emphasis to the fact that it’s stock split now feels like too little too late, even though it did give the stock a nice boost when it was announced.
Now Amazon stock faces must-hold support.
Trading Amazon Stock
Weekly chart of Amazon stock.
Chart courtesy of TrendSpider.com
Zooming out the weekly chart has been the play with Amazon stock, since it has been largely range-bound for more than a year.
Recently, $2,700 had been holding as support. Incidentally, that’s the 50% retracement from the all-time high down to the Covid-19 low.
With today’s earnings plunge, that support level is out the window and on any future bounces, it will be looked at as potential resistance until it’s reclaimed.
I am watching the $2,450 to $2,525 zone very close now. Dipping into this zone now, it’s where Amazon stock finds its 200-week moving average, the 61.8% retracement and the 50-month moving average — all in that order.
If this area acts as support, it’s possible we get a bounce back up toward the $2,630 area. Above that opens the door to prior support at $2,700.
Below $2,400 could open the door down to the $2,200 to $2,250 zone. Obviously bulls are looking to avoid this scenario, but before we get too far ahead of our skis, let’s see how the current support area holds now.
