Amazon packages on a front door step. Image source: jahcottontail © 123RF.com
This has been a mostly robust earnings season for Big Tech, with solid performances by Apple and Tesla. Yet, the Nasdaq Composite, the benchmark index for tech stocks has continued to trade in a range on some diverging factors in the sector.
Amazon's quarterly performance missed the earnings forecasts as consumer demand eases significantly from a year prior. As a result, the share price sunk in extended trading yesterday, tumbling more than 7 per cent.
Revenue growth stagnated considerably compared to the second quarter of 2020 due to the pandemic's changing impact. Last year, Amazon benefited from a massive upsurge in demand owing to the global lockdowns and extensive fiscal support for households in the U.S.
Amazon 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
The share price would open today's session with a massive gap at 3331.97, as indicated on the 4H chart above. Yesterday's earnings misstep exacerbated the recent bearish pressures for the stock.
Even still, the drop is likely to be held back by the 200-day MA (in orange) and the 300-day MA (in purple). A potential pullback may then ensue to the 38.2 per cent Fibonacci retracement level at 3432.97.
These assertions are based on the expectations of the Elliott Wave Theory. The previous upswing took the form of a bullish 1-5 impulse wave pattern, which is why the current downtrend is expected to evolve in a similar manner.
The second retracement leg (3-4) of the new bearish 1-5 impulse wave pattern is likely to peak near 3432.97 for one additional reason. The 38.2 per cent Fibonacci retracement level was recently crossed by the 100-day MA (in blue), which is presently serving the role of a floating resistance.
The Elliott Pattern is then likely to bottom out near the last Fibonacci barrier - the 61.8 per cent retracement level at 3223.15. Overall, the 1-5 impulse wave pattern is likely to be contained within the boundaries of a descending channel.
The share price tumbles on revenue growth misstep
In its quarterly earnings report, Amazon posted revenue of $113.08 billion vs $115.2 billion expected. The huge discrepancy between the earnings forecasts and the retailer's final performance is due to the changing coronavirus fallout.
“Over the past 18 months, our consumer business has been called on to deliver an unprecedented number of items, including PPE, food, and other products that helped communities around the world cope with the difficult circumstances of the pandemic […]” said Andy Jassy, Amazon CEO.
Amazon QoQ Earnings Per Share. Image source: TradingEconomics.com
Even still, net income increased to $7.8 billion in the second quarter. Diluted Earnings Per Share (EPS) thus reached $15.12 vs $12.30 expected.
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