As the chart shows, Amazon (AMZN) shares rose to a record high on Friday, reaching the $250 mark for the first time. This came after the publication of a strong earnings report:
→ Revenue: $180.2 billion (up 13% year on year).
→ Earnings per share (EPS): actual = $1.95, forecast = $1.56 (a 25% beat).
Investor sentiment was further boosted by the following:
→ AWS (Amazon Web Services) revenue grew by 20% year on year, despite competition from Microsoft Azure and Google Cloud.
→ Amazon issued a confident outlook for the crucial holiday (fourth) quarter.
When analysing the chart on 24 September, we:
→ used AMZN share price fluctuations to construct an upward channel (shown in blue);
→ noted early signs of weakness.
Subsequently, the price reached a low at point A – where the bulls found support from the lower boundary of the channel and the August low (in fact, there was a false bearish breakout) – and made a successful attempt to resume the uptrend.
The two red candles on Friday suggest that the initial reaction to the report may have been overly optimistic (as confirmed by the RSI indicator). Therefore, it is possible that a corrective move will follow – for example, towards the support area that includes:
→ the median line of the current channel;
→ the previous all-time high of $242;
→ the September high around $238;
→ the 0.382 Fibonacci retracement level of the A→B impulse, around $235.
