Amazon stock price analysis: stock could stay range-bound in short term

The Amazon stock analysis shows the price is stuck in a consolidation and this range-bound action may continue for a few more days

Amazon is by far the biggest e-commerce retailer in the US. The company recorded  $347bn (£253bn, €294bn) worth of GMV (gross merchandise volume) in 2020, much higher than second placed Walmart, which did $54bn in GMV during the same period. Amazon’s net income increased from $11.6bn in 2019 to $21.3bn in 2020. A large part of the growth in 2020 can be attributed to the coronavirus pandemic, as people stayed indoors and shopped online. 

However, several analysts believe that Amazon’s major growth in the future will come from its Amazon Web Service cloud unit. This is a fast-growing business, which did sales of $45.37bn in 2020, up from $35.026bn in 2019. Operating margins also rose from 26.2 per cent in 2019 to 30 per cent in 2020.

Amazon recently announced that it plans to expand its pilot Amazon Care virtual services to all the employees and families in the 50 US  states from this summer. The virtual care will eventually be expanded to include other companies as well. Some analysts view this as the next sector that Amazon may disrupt.

However, Amazon’s growth story comes at a price: considering the consensus earnings per share forecast of $47.12 for this year, the stock quotes at a price-to-earnings ratio of 65.5 times. So, if the stock fails to deliver, it is likely to witness a sell-off.

While the fundamentals are positive, let’s do the Amazon stock technical analysis of the weekly chart to determine the strength in its long-term trend.

Amazon stock analysis − weekly chart

Amazon is currently consolidating in an uptrend. This suggests a balance between supply and demand. The 20-week EMA has flattened out and the relative strength index (RSI) has dropped to the midpoint, suggesting the range-bound action may continue for a few more days.

The stock had entered a similar range between August 2018 to March 2020. Once the stock broke out of the range in April 2020, it rallied from about $2,100 to $3,500 in August 2020, a rise of about 66 per cent.

If the bulls manage to defend the support of the range and push the price above the all-time high at $3,549.44, the stock may start the next leg of the uptrend that could reach $4,794. On the other hand, if the bears sink the price below the range, the stock may drop to $2,500 and then $2,100.

The AMZN stock analysis of the weekly chart suggests the range-bound action may continue for some time as the indicators are not pointing to an advantage either to the bulls or bears. 

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Let’s do the Amazon stock technical analysis of the daily chart to determine the direction of the next possible trending move.

Amazon stock analysis − daily chart

The stock is roughly trading between $2,870 and $3,500. Both moving averages are flat and the RSI is just below the midpoint, indicating a balance between supply and demand.

The bears are currently defending the 50-day SMA. If the price turns down from the current level, the bears will again try to sink the price below the range. If they succeed, the stock could start a new downtrend that has a target objective at $2,240.

Contrary to this assumption, if the bulls can propel the price above the 50-day SMA, the stock will attempt to rise to the resistance of the range. A breakout and close above the range could start the next leg of the up-move.

Is Amazon stock a buy or sell at these levels

The AMZN stock analysis shows the price is stuck in a large range. Traders may wait for the price to rebound off the support at $2,870 to initiate long positions with the stop-loss placed just below the range. Profits may be booked when the price reaches close to $3,400.

Another buying opportunity may open up if the bulls push the price above the range. Conversely, if the stock slips below the $2,870 support, long positions may be avoided until a new buy setup forms.

Trade Amazon.com Inc − AMZN share price

Amazon.com Inc
Daily change
90.95
Low: 90.83
High: 94.39

FURTHER READING: Gold price analysis: the precious metal is at risk of falling below $1,500 in the short term
FURTHER READING: Boeing stock price analysis: the stock may start a new uptrend within the next month

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