Amazon Shares Drop as Revenue Falls Short of Expectations
Amazon (AMZN) shares fell sharply in premarket trading on Friday after the e-commerce giant reported weaker-than-expected quarterly revenue and issued light current-quarter guidance. The company’s core retail business saw a decline in average selling price as consumers opted for cheaper products.
Concerns Over Increasing Competition and Slowdown in Consumer Spending
Despite reaching a record high last month, Amazon’s stock has faced selling pressure in recent weeks. Investors are becoming increasingly concerned about growing competition from discount e-tailers and a slowdown in consumer spending due to lingering inflation and higher interest rates.
In premarket trading, Amazon shares were down 7.9% at $169.50.
Bearish Engulfing Pattern Signals Lower Prices
Amazon shares have been on an upward trend since the 50-day moving average crossed above the 200-day moving average in May last year, generating a golden cross buy signal. However, after reaching a new record high, the stock has entered a selling mode, raising the possibility of a bull trap.
Prior to the company’s quarterly results, Amazon’s stock rallied above the 50-day moving average but reversed course and closed below the previous day’s low. This created a bearish engulfing pattern, a candlestick formation that indicates a shift in market psychology and suggests lower prices.
Key Support Levels to Monitor
Following the post-earnings selling, investors should keep an eye on four key support levels that could provide a floor for the stock.
The first level to watch is $170, where the stock may find support from the rising 200-day moving average and an established uptrend line. This level has attracted buying interest in the past, as it is a confluence of support from swing lows between December 2022 and October last year.
If the stock fails to hold at $170, the next support level to monitor is $161. This level is near a late January peak that formed several days before a breakaway gap following the company’s February 2 earnings announcement.
A further decline could bring the stock to $145, where buyers may enter near a trendline that connects major price peaks in August 2022 and September 2023, as well as a period of consolidation in November and December last year.
If the stock experiences a deeper correction, it may test the $123 region. This level has historically provided support, as it is connected by a horizontal line that links numerous peaks and troughs between July 2022 and October 2023.
It is important to note that the comments, opinions, and analyses expressed in this article are for informational purposes only. Investors should conduct their own research and analysis before making any investment decisions.
As of the date this article was written, the author does not own any of the securities mentioned.
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