The Street is hosting a live blog of Amazon’s Q4 earnings report and call with analysts after the close today. Please check our home page then for more details.
Apple (AAPL) - Get Report, Microsoft and other mega-cap tech companies topped out in late August and early September. While the rest of the market recovered to new highs months ago, this group has been slow to get going.
Amazon is one of the biggest culprits. Of the FAANG group, Amazon is the second worst-performing name, up just 7.3% in the last six months.
If we neglect Monday’s tasty 4.3% rally, Amazon has risen just 1.3% in the last six months.
There’s a saying in the trading community that goes along the lines of, “the longer the base, the higher the space.” In other words, the longer a stock consolidates or forms a base the more upside potential it has.
With Amazon, the stock could easily continue to consolidate for several more months. A base of a year or longer is not unheard of.
However, Monday’s breakout over $3,345 was impressive. It sent shares over a notable resistance level and put bulls in the driver seat. Now though, Amazon has to deliver on earnings.
Disappointing results could send the stock right back below resistance and into its cluster of moving averages. Below $3,200 and wedge support could be back on the table.
Below $3,100 could put the 200-day moving average in play near $3,000.
On the upside, the fourth-quarter high near $3,496 is the first upside target, followed quickly by the all-time high at $3,552.
Should Amazon clear the high and extend higher, it could kickstart a larger time-frame rally, potentially putting the 161.8% extension in play up near $3,970.
While the $4,000 level seems far off, it's possible it gets there with a stronger post-earnings breakout. Who knows, maybe Amazon will finally split its stock and send it ripping higher.