The head and shoulders pattern follows one after another! Where is the Amazon stock price heading? (2024.10.08)

Hello everyone, this week's 【Technical Tracking】 will analyze one of the "Seven Giants" in the US Technology sector. $Amazon(AMZN.US)$ As a hot stock long favored by Wall Street, Amazon has recently been rarely downgraded by a well-known Institution. What signals does this send?

Hot Events

On October 7, 2024 (Monday), Amazon's stock price fell by 3%. Previously, Wells Fargo & Co Analyst downgraded the stock rating from "Shareholding" to "Hold", and the Target Price was cut from $225 to $183.

Wells Fargo & Co Analyst Ken Gawrelski pointed out that although Amazon's performance shows a positive correction trend, some factors may put pressure on this trend in the short term. The main challenges facing Amazon include increased competitive pressure from retail giant Walmart, a slowdown in the contribution of the advertising Business to operating profit, and the high costs of low-orbit satellite deployment plans.

Bloomberg data shows that among the Analysts tracking Amazon's stocks, the vast majority are Bullish on the stock, with only five not giving it a "Buy" rating. According to the consensus expectation of Analysts, Amazon's stock price has the opportunity to rise to about $220 in the coming year, with a potential upside of over 20%.

In early August, Amazon's second-quarter report fell short of Wall Street's expectations, causing the stock to plummet nearly 9% in one day. However, Amazon's most promising Amazon Web Services (AWS) Business maintained strong performance, partially offsetting the impact of its retail Business underperforming expectations. The AWS Business revenue in the second quarter increased by 19% year-on-year to $26.3 billion, exceeding Analysts' expectations. This Business includes Amazon's artificial intelligence (AI) services.

Although Amazon expects AI to contribute billions of dollars in revenue to the company over the next few years, Wells Fargo & Co believes that AI cannot stand alone to offset the potential pressure faced by other Businesses, so overall, Amazon's profit growth may be constrained.

Technical Analysis

Trend analysis:

The weekly chart shows that Amazon's stock price has exhibited a strong upward trend since the beginning of 2023, with an increase of 138% over a year and a half. Through the Fibonacci retracement lines (golden ratio), it can be seen that after hitting a historical high of $201 in July this year, the stock price retraced approximately 38.2% of the previous increase, which is a typical retracement level.

The daily chart indicates that Amazon seems to be regaining its upward momentum, with the stock price rising more than 20% compared to the low of $151 on August 5. However, it is worth noting that near the recent two high points, a large and a small head and shoulders pattern have appeared, which typically suggests that the stock price may turn from rising to falling.

Indicators interpretation:

● Although Amazon's stock price has experienced a certain degree of correction, it is currently above the 50-day moving average (MA50) and the 200-day moving average (MA200), indicating that its overall upward trend has some support.

● The MACD indicator generally trends in alignment with the price movements, but a 'death cross' has appeared above the zero line, reflecting the recent downward trend in stock prices.

● The KDJ indicator shows oversold conditions, with the Candlestick first breaking below the 20 oversold boundary, indicating a potential short-term rebound opportunity.

Overall, the long-term upward trend of Amazon's stock price remains intact. Although the stock has declined in the past two weeks, showing a micro head and shoulders pattern, investors can closely monitor potential rebound signals in the short term.

This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

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