Amazon Plunges On Weak Q3 Sales, And This Chart Shows More Risk Ahead

Amazon.com, Inc. AMZN traded 8 percent lower on Friday morning, after beating Wall Street expectations for the bottom line but missing on the top line.

The e-commerce company reported earnings per share of $5.75 and total revenue of $56.6 billion, compared to analyst estimates of $3.12 and $57.1 billion. Note that the EPS may not compare to the estimates. While guidance for operating income was on the mark, Amazon’s projections for revenue came in below analyst estimates.

With the holiday season approaching, CFO Brian Olsavsky cautioned, "It’s a difficult period for us to estimate. We're bullish on Q4, but we’ll have to see how revenue comes in."

Regardless of how Q4 shakes out, our outlook for the stock price cannot be described as bullish. As evidenced by today’s price action, it doesn't take much to push a stock lower when the valuation is this high. Looking at the market cycles for Amazon on the chart below, we can see that it is in the declining phase of the current cycle.

This means there’s still plenty of time to fall before the cycle concludes. As it approaches $1600, the stock has multiple supports. Yet our view is that lower prices are likely moving into late December.

Amazon Stock Chart with Weekly Bars

Related Links:

Why Did Somebody Aggressively Buy About Half A Million Shares Of Apple Thursday Night?

Analysts React To Amazon's Mixed Earnings, Holiday Guidance