Chart Wars: Bears Control Amazon And Shopify, But Will Either Stock Reverse On Fundamentals?

Amazon.com, Inc AMZN and Shopify, Inc SHOP were trading inverse to each other on Thursday, with Amazon spiking up over 5% and Shopify sliding almost 7%.

The S&P 500 was down about 1.3% after a bullish day on Wednesday where the index rallied 1.3% to close the trading session at 4,277.87.

Amazon and Shopify have declined heavily since Nov. 19, 2021, when Amazon formed a bearish double top near the July 13 all-time high of $3,773.08 and Shopify hit an all-time high of $1,762.92. Now trading down about 22% and a whopping 69% from the highs, respectively, traders and investors may be wondering if the bottoms are in for the e-commerce giants or whether there’s more downside ahead.

Both stocks are trading in confirmed downtrends and until either stock flashes a bullish signal anything more than a bounce is unlikely, although Amazon’s stock has become less bearish due to fundamental factors.

It should be noted, however, that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.

In The News: Amazon's fundamental share structure will change on June 6, when the stock begins trading on a 20-to-1 split-adjusted basis and initiates a $10 billion share buyback. Historically, big tech companies that have made the decision to split their stock have seen a high amount of investor interest running up into the event.

On Aug. 11, 2020, when Tesla announced a 5-for-1 stock split would take place on Aug. 31, 2020, the stock soared 81.95% into the event. Similarly, when Apple announced July 30, 2020 that its stock would begin trading on a 4-for-1 split-adjusted basis on Aug. 31, 2020, the stock ran 39% between those two dates.

Despite Shopify trading at a price that's too expensive for many retail traders, the company has never announced a split, possibly because the company has only been trading publicly since 2015, whereas Amazon began trading on May 1, 1997.

See Also: Why Amazon's 20-For-1 Split Is 'Much More Important Than A Typical Tech Company Stock Split'

The Amazon Chart: Amazon entered into a downtrend on Feb. 9 and has since made a very consistent series of lower highs and lower lows, with the most recent lower high created on Feb. 28 at the $3,089 level and the most recent lower low printed on Tuesday at $2,671.45. On Thursday, although Amazon gapped up 4.6%, it didn't change trend and may simply be printing its next lower high.

• On Thursday, Amazon looked to be printing a doji candlestick on the daily chart, which also indicates the stock may trade lower on Friday because a doji can be a reversal indicator.
• Amazon has a gap between $2,805 and $2,879.56, which is likely to be filled in the future because gaps on charts fill about 90% of the time.
• Amazon has resistance above at $3,000 and $3,131,06 and support below at $2,881 and $2,796.

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The Shopify Chart: Shopify has also been trading in a downtrend since Feb. 9, with the most recent lower low created on March 8 at $511.80 and the most recent lower high formed at the $594.90 level on Wednesday.

• Unlike Amazon’s relative strength index, which is measuring in at a comfortable 47%, Shopify’s RSI has dipped to the 32% level, which indicates a bounce may be on the horizon because the stock is close to becoming technically oversold.
• Shopify has a gap above on its chart between $800 and $843, which the stock is likely to trade up into in the future.
• The stock has resistance above at $621.13 and $711.18 and support below at $542.20 and $470.48.