Amazon: Looking For A Bottom (Technical Analysis) (NASDAQ:AMZN)

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Amazon (NASDAQ:AMZN) is an incredible story and I have followed it from the beginning. I had some knowledge of the book publishing industry and underestimated Bezos and his jump from books to all retail and even to the cloud and transmission. Bezos was a really cool CEO, something he didn’t expect from a Wall Street analyst. I guess that’s why he left Wall Street.

Now Bezos is no longer CEO. Even if it was, he might not help. Yet look how many times the founder of Starbucks (SBUX) has come back to save the company. I don’t think Bezos will return, although he did once.

Everyone loves using Amazon. Some have never known any other way to shop. Even the competition tries to give you that Amazon experience when shopping online. Costco (COST) and Walmart (WMT) are yet to be touched by Amazon. Of course, all of retail is now facing a global recession in 2023. Everyone will have to weather the storm and batten down the hatches.

Small investors sometimes suffer from the illusion that just because they love a company and its products and services, it is a good investment. Sometimes it is true, but not always. Companies become so big that they can no longer grow at more than 20% each year. Apple (AAPL) is only growing at 8%.

AMZN’s growth is slowing and a global recession presents real challenges ahead, as do inflation and supply line disruption. Therefore, it is not surprising that its price is falling, looking for a bottom. In the past, however, AMZN has demonstrated its amazing ability to cut costs and increase profits. You can easily go from growth to higher earnings to bottom out and recovery.

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AMZN is going down and looking for a bottom and we want to know how low it is going. Here is the monthly chart. The red vertical line, Sell Signal, occurred in 2021 and was triggered by the full STO signal shown at the bottom of the chart. Also shown at the bottom of the chart, AMZN:$SPX shows that AMZN was already underperforming the index at the time of the sell signal. It has continued to underperform the Index since 2021, forcing portfolio managers to dump it. They won’t start buying until it outperforms the index again.

You can see that AMZN had a nice bounce from the $101 low to $147. Now he’s back down retesting the bottom. Due to the gloomy outlook for 2023, we expect the price to break below the current low of $101 and hit $75 to form a bottom. We have not yet seen the exhaustion selling with very high volume that usually marks bottom. Although the volume was almost four times the average volume in Friday’s 6.8% price drop.

Here is the monthly chart showing the sell signals that were implemented in 2021. When they change to buy signals, we will put AMZN back in our model portfolio.

Looking for a break below $101

AMZN tests $101 fund (StockCharts.com)

In conclusion, AMZN has just reported a 15% growth in revenue. Let’s be generous and give him 25 EP on next year’s estimated earnings of $2.26. That gives us a price target of $57. Note that 90 days ago the revenue estimate was $2.50. Those earnings estimates are falling. So you can see that our chart target of $75 is quite possible in 2023. Wait for the bottom and the buy signal on the chart.

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