I don’t know about you, but my email box is ringing with Black Friday ads from just about everyone, but the ones that keep catching my eye is Amazon Prime. They are offering me everything from making Thanksgiving dinner to cleaning up afterwards if I will shop at Amazon.com for the holidays. With more and more shopping moving from the brick and mortar to e-shopping it would only make since they would email me seven times a day to make sure I know they are there to help me with all my gift ideas. While I am not big on shopping, I am into making money on stocks and thus, what about Amazon (AMZN) for the holidays? Worth looking at if they are going garner the greatest share of online shopping… isn’t it?
The bad news came on October 24th when Amazon once again came up short on their earnings report for the third quarter. Since settling near the $284 level the stock has managed to make investors willing to put money back to work in the stock. On Wednesday it closed at $326 and up more than 14% since hitting the low. This begs the next question… can the stock climb higher relative the fourth and biggest quarter due to holiday shopping? The move in the stock makes you want to say yes, but for many it will depend on how the Thanksgiving shopping bonanza falls out for the company.
We all know the state of the fundamentals… expenses have moved higher cutting into profits and the ten year grace period that investors have granted Jeff Bezos and company has been used up, thus the decline in price relative to the third quarter data. It would be fair to say that if the fourth quarter falls short of expectations the selling is likely to return. That would set up an investment in the stock as a potential trap based on how they perform for the holiday period. Not exactly the fundamental picture I like to paint nor a painting that I would like to buy.
Technically speaking the chart is of interest as it has set up nicely to break higher and extend the upside or, falter, break support and retest the previous lows from October. Either way the opportunity will present itself on the chart. The picture below is a snapshot of where we are currently relative to the downtrend that has been in play since the high was hit in February near the $405 level. It is easy to see the trendline drawn on the downside and equally easy to see the support levels drawn at the lows of $284 in May and October creating a bottom or support for the chart. this is a perfect picture of a descending triangle with the 200 day moving average corresponding to the downtrend line. That would define the resistance level we would need to break through for the current move higher to validate itself and potentially move to the $350-365 range. It seems like a reasonable target and opportunity if the move can gain near term momentum on the upside move. If it fails to break higher and resistance holds the test lower would find potential support at $316 and it would step down all the way to the $284 mark. Not as attractive of a prospect relative to the time of year, and the opportunity the company has to validate they are improving fundamentally.
As this unfolds moving forward determine what opportunity Amazon offers you from the investment perspective. If the move is strong enough the profits may reimburse you for all your spending at the online store. As with any investment you have to define your opportunity relative to your risk and make your investments accordingly. As the saying goes in wood-working… measure twice and cut once. You want to make your don’t come up short! The opportunities for Amazon to shine for the holidays are in front of it and only time will tell how this opportunity pans out. It will either be a happy holiday season or Santa may not show up at all.