Two analysts believe Amazon’s charts and fundamentals are reasons to be bearish on the internet retailer. Are they right?
“Certainly a cult stock with a strong underlying business,” is how Richard Ross, Global Technical Strategist at Auerbach Grayson and Talking Numbers contributor, describes Amazon. “It’s going to take a lot to chip away at that psychology and bring this mighty oak down. But, we’re seeing mounting evidence with bearish indicators that that’s exactly what’s going to happen here.”
On the technical, Ross sees the stock following an uptrend for the last twelve months. Though it’s up more than 20% since this time last year, Amazon’s shares peaked in January. It has underperformed the tech sector this year, which made new highs.
According to Ross, it was also in January that the stock began its downward trend channel, a series of lower highs and lower lows. The stock is moving down closer to convergence of the year-long trend line, the 200-day moving average, and the downward trend channel. “If we take out that $254 level,” says Ross, “that’s going to give us a confirmed sell-signal.”
Enis Taner, Global Macro Editor at RiskReversal.com and also a Talking Numbers contributor, believes the charts reflect the fundamentals. In fact, he believes it’s a stock where the charts matter more than for any other company.
“I like to call Amazon the best not-for-profit company in the world,” says Taner. “They haven’t made a substantial profit in their entire history but the stock still trades near all-time highs.”
“I do think the stock’s weakness is a sign initially that buyers are running out of control. I think sellers are slowly taking over,” says Taner. “I would look for the $275 level.”
For more of their reasons why they’re negative on Amazon, see the video above.