What Amazon's Chart Says Heading Into Earnings

"Magnificent Seven" member $Amazon.com(AMZN)$   has fallen some 6.5% over the past three months and 4% over the past year, trailing the $S&P 500(.SPX)$   in both time periods. What does the retail-and-cloud giant's chart and fundamental analysis say ahead of Thursday's Q4 results?

Let's check:

Amazon's Fundamental Analysis

The Street is looking for AMZN to report $1.95 of Q4 GAAP earnings per share on just about $211.2 billion of revenue.

That would represent a 4.8% gain from Q4 2024's $1.86 of GAAP EPS, while reflecting 12.5% growth from the $187.8 billion Amazon recorded in the same period a year earlier.

All eyes will be on Amazon's results and forward guidance given the sell-offs that several other Mag-7 stocks and non-Mag-7 Big Techs have recently seen following their earnings releases.

There will also be a focus on growth in Amazon's AWS business specifically, and on the company's capital expenditures.

That said, 34 of the 44 sell-side analysts I track that cover AMZN have revised their earnings estimates higher since the quarter began. Just three have lowered their numbers, while seven left their estimates unrevised.

Hence, there's some optimism among analysts about the upcoming results.

Amazon's Technical Analysis

Let's take a look at AMZN's chart going back some eight months and running through Monday afternoon (Feb. 2):

We will see that in late October and early November, AMZN broke out of a flat base of consolidation (marked with two purple horizontal lines).

The resulting rally sparked a solid 8% move off of the apparent pivot, not to mention a 23% gain off of the lower trendline's bottom.

Amazon then immediately developed what now looks like a closing-triangle or pennant pattern. These kinds of patterns are neither bullish nor bearish, but often foretell a violent move one way or the other once the formation closes. 

AMZN is currently testing its 21-day Exponential Moving Average (or "EMA," marked with a green line above). Holding that line would help keep the swing crowd on board.

And should the 21-day EMA fail to hold, more-important tests would come at Amazon's 50-day Simple Moving Average (or "SMA," denoted by a blue line) and 200-day SMA (marked with a red line). Those are the two lines where professional portfolio managers and risk managers tend to make a lot of their buy-or-sell decisions. 

Meanwhile, there's clearly a lack of decisiveness visible in the chart's other technical indicators.

Amazon's Relative Strength Index (or "RSI," denoted by a gray line at the chart's top) is just above neutral and seems to be improving.

However, the stock's daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom) is looking neither strong nor weak.

The histogram of the 9-day EMA (the blue bars) is hovering close to the zero-bound, which means almost nothing.

Similarly, the 12-day EMA (the black line) and 26-day EMA (the gold line) appear to be running together, which is also essentially neutral.

That said, should the black line gain the upper hand, that would be considered bullish. Conversely, it'd be a bearish sign if the gold line rises above the black one.

An Options Option

Options traders who are bullish on Amazon but don't want to risk a lot of capital might employ a "bull-call spread" in this scenario. That's where you go long one call and short a second one with a higher strike price, but where both expire on the same day.

Here's an example that roughly uses Amazon's 21-day EMA ($238.60 in the chart above) as a reference point:

-- Long one AMZN call with a $237.50 strike price and a Feb. 6 expiration (i.e., after Thursday's earnings release). This cost about $7.80 at recent prices.

-- Short one AMZN Feb. 6 $257.50 call for about $2. 

Net Debit: $5.80.

The options trader in this example is risking a maximum theoretical loss of $5.80 (the net debit) to try to bring in $20, for a $14.20 maximum theoretical profit. The trader would receive this if Amazon trades at or above $257.50 at expiration.

Conversely, the trader would face the $5.80 maximum theoretical loss (i.e., the entire net debit) if AMZN trades at or below $237.50 at expiration.

Disclaimer: The information provided is NOT financial advice. I am not a financial adviser, accountant or the like. This information is purely from my own due diligence and an expression of my thoughts, my opinions based on my personal experiences, and the way I transact.

@TigerStars  @CaptainTiger  @TigerWire  @Daily_Discussion  @Tiger_chat  @Tiger_comments  @MillionaireTiger