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Asset Watch

Is Amazon’s decline incomplete?

 

Tuesday, August 30 2022

Fed Chairman Jerome Powell dropped the hawkish hammer during his Jackson Hole speech on Aug. 26, with financial markets feeling the vibration, as the S&P 500 declined by 3.37%.

Powell said:

“While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”

He added:

“We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%.”

With risk assets re-pricing to reflect all the above, could Amazon confront more short-term pain before support materialises?

Amazon still hasn’t filled the after-hours gap that occurred on Jul. 29 after the company reported strong second-quarter earnings. Since most gaps fill, a pullback near or below the June closing high is plausible, meaning $125.55 may be on the cards.

Amazon’s 50-day moving average (the blue line) is not far behind, and it provided support when the stock suffered a short-term retracement in July. Therefore, $124.17 is next-level support and is also near the low end of the gap range.

Finally, Amazon has a third saviour with its rising support line. The trendline draws from the late June lows, so if Amazon consolidates over the next week, all three levels could converge near $124 to $125.

So, is patience the best course of action?


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