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Amazon share price analysis for March: the company may benefit from social distancing

By David Becker

The shares have rallied despite headwinds for the market, but what do the charts forecast?

shares moved higher during the past three major trading session, despite declines in the broader markets. Amazon is one of the few companies that will be able to take advantage of social distancing as it will have the bandwidth and logistics to deliver products to companies and individuals around the globe. While parts of Amazon’s business such as AWS (cloud services), might stagnate while the global economy contracts, the logistics business will likely continue to generate revenues despite the slowdown. The only caveat is that the company staff are susceptible to Covid-19, which could spread into its logistics network.

Is Amazon well-positioned?

Amazon received some high praise from famed value investor Bill Miller who said that Amazon is an ideal stock to buy during the market’s steep sell-off. Miller said that all of this worldwide activity that deals with the coronavirus could be relabelled the "Amazon Subsidy Act of 2020".

It has not gone unnoticed by investors that Amazon is in the right place to stretch its logistics muscle and deliver nearly everything to everyone. With some cities in the US already on lockdown, people and companies need a reliable source to purchase goods and have them delivered to homes across the country. The share price in the third week of March outperformed the by a robust 15 per cent and is poised to test higher levels.

However, the risk still remains. On 19 March, the company revealed an employee working at one of its Queens, New York shipping facilities, has contracted Covid-19. This is the first report of a positive report in the a US delivery network. Amazon temporarily closed the warehouse near LaGuardia Airport so it can be cleaned and sanitised. The confirmed case was in an Amazon delivery station, which is much smaller than a fulfilment centre.

Amazon technical analysis

Amazon shares have rallied despite headwinds for the broader market. Prices gapped higher on Thursday 19 March 2020, recapturing resistance which is now seen near the 200-day moving average at 1,851. Resistance is seen near the 50-day moving average at 1,942. A close above this level could see a re-test of the all-time highs at 2,185. Prices have recaptured the December 2018 low which is likely seen as firm support going forward.

Medium-term momentum is about to turn positive as the MACD (moving average convergence divergence) index is poised to generate a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average, crosses above the MACD signal line (the 9-day moving average of the MACD line).

Short term momentum has also turned positive as the fast stochastic generated a crossover buy signal in oversold territory. The current reading on the fast stochastic is rising, printing a reading of 61, which is on the upper level of the neutral range. The relative strength index (RSI) broke out of a bottoming pattern and is accelerating higher, pointing to positive momentum.

FURTHER READING: Apple share price analysis for March: how the coronavirus affects the company

FURTHER READING: Stock market crash 2020: what is going to happen next?

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