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Asset Watch

Where could Amazon bounce?

Tuesday July 23, 2024

Big Tech took another beating last week, as profit-taking hammered outperformers like Amazon. However, with the e-commerce giant reporting earnings on Aug. 1, Needham analyst Laura Martin believes services and live-streaming are the next fundamental catalysts to push the stock higher. She wrote on Jul. 17 that Twitch is a “hidden gem,” adding “We believe that [Amazon] should be valued as a services company rather than a products company.”
“Services revenue and margins (including advertising, subscriptions and cloud) are far larger and growing faster than [Amazon’s] core e-commerce business. Services growth implies valuation multiple expansion owing to its high margins, we believe.”
Though she also increased her price target from $205 to $210, as the earnings report approaches, you should focus on a few key technical levels to determine the short-term risk-reward.
Amazon closed below its 20-week moving average (the blue line) last week. Yet, the same thing occurred near the end of May and the breakdown was invalidated. Consequently, this week is critical to determine if the recent drop has run its course.

If not, the area near $175 (the horizontal white line) marks the range of highs and lows that have materialised since the end of January. Therefore, it could provide a nice support zone if the drawdown continues.

Finally, Amazon’s 40-week MA (the yellow line) stands near $168. It marked the bottom in late 2023 and was a major resistance level during the 2022 bear market. As a result, it’s an ally for the bulls this time around.

So, can Amazon shake off last week’s rout, or should you wait until after the Aug. 1 earnings report to make your move?


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