Asset Watch
Thursday, October 10, 2024
Earnings season has arrived, with the big banks kicking off the festivities on Oct. 11. Oil prices and Treasury yields have risen sharply recently, and the Cboe Volatility Index (VIX) jumped back above 20. But as geopolitical tensions add to investors’ anxiety, October could be a volatile month.
Can short-term overreactions create some solid buying opportunities?
Sounding the alarm ahead of the next earnings release, Wells Fargo analyst Ken Gawrelski cut his Amazon price target from $225 to $183. He wrote that Amazon “has been a consistent positive revision story, but we believe factors pressure revisions in the near term. While the market is more prepared for pressure on 4Q [operating income], we caution that margin expansion could be capped in 1H25 as well.”
Consequently, Amazon has joined the likes of Alphabet and Microsoft as Big Tech leaders who remain on shaky fundamental ground.
While Amazon could correct further in the weeks ahead, the stock has noticeable price support in the $175 area (marked by the horizontal white line). A drop to this level would mark a roughly 13% decline from the 2024 high and could be a solid entry point.
Considering the stock closed near $180 on Oct. 7, Amazon may have limited downside. For example, the 10-week moving average (the purple line) is near $180, the 40-week MA (the blue line) is near $179, and the 50-week MA (the yellow line) is near $172.
Combining the three with the horizontal white line creates a powerful support group in the $172 to $180 range, which should hold unless extremely poor earnings print sours sentiment.
The right trading strategy depends on your risk tolerance. If you prefer the safer route, you could wait until after earnings season to enter a position and eliminate unwanted fundamental risks.
But if you believe the setup is too enticing to ignore, you could enter a position now and add more if Amazon dips closer to $175.