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Amazon and Apple: An Earnings Preview

Is it Friday yet? Not so fast!

There are still many market-moving events up on the calendar today. First of all, we have the post-Fed move. While we can oftentimes see massive Fed-induced market rallies, they haven’t lasted. Will today be different? There are some signs of that, but until I get follow-through, I’m not willing to change my bearish take.

Two major events up on the docket today are Amazon and Apple earnings. These events are going to move markets – for better or for worse.

Here is what I’m looking for…

Amazon (AMZN)

While Microsoft (MSFT) and Alphabet (GOOGL) were able to scrape by in the current economic climate, I don’t think Amazon will be as lucky. Amazon’s business segments just rely too heavily on physical products and the expenses there have increased astronomically. Between the cost of transportation, supply chain issues, worker pay, inflation, consumers adjusting spending, and more, I just can’t imagine this is a good quarter for Amazon. I still like the company and the stock but I just think this quarter there is no way they can scrape by given current economic conditions.

Looking at the charts, AMZN has done a decent job holding lows on the year and has slowly started to climb higher over the course of the past month. But, look at what happened last quarter on earnings. AMZN posted a big loss after falling into earnings, gapped down on earnings, and then continued to fall. Even post-split, AMZN wasn’t able to rally.
The only saving grace Amazon will have is that earnings will probably be expected to be pretty poor. AMZN was already losing upside momentum for the previous 3 quarters before last quarter, even prior to the bear market, and especially for that reason, I don’t expect a big upside move out of Amazon.

But of course, I always have to include the ‘if I’m wrong section,’ because of course, we always must control our risk. The craziest part about my bearish take is that because expectations are so bad, if they end up with a report that is better than feared…they could still rally! If AMZN breaks through the $130-140 zone, especially with solid follow-through, that’s where I’d consider this stock to have turned its corner.

The reality of explaining why I’m bearish on a stock and then adding why it might rally seems a bit crazy, but that is the reality we are living in this earnings season!

Amazon in the Hot Zone

As for levels, the market maker expected move on Amazon is ~$6.85. In good news, AMZN would need to experience a move more than twice what is expected, in order to hit a new low. So, even if it is slightly weak, I wouldn’t expect a destructive move as the recovery it’s made over the last month has been helpful to chart structure. But, at the same time, it would also need more than the expected move to break the downtrend.

 

As such, unless AMZN posts a massive surprise, I expect it to remain lackluster at best – and a potential candidate to short on an earnings rally.

Want to learn more about Fed day plus earnings and my Meta outlook? I stopped by CNN Business yesterday to discuss it and more with Alison Kosik!

Apple (AAPL)

Apple has demonstrated the most relative strength out of the FAANG stocks, but unfortunately, I think because of the strong move it’s had, it puts it in the worst position to continue to rally on earnings. Most companies that are rallying post-earnings are rallying based on ‘better than feared’ earnings, but Apple unfortunately has already rallied so much. I just can’t imagine that Apple was able to do well this quarter given supply chain issues, inflation, shifts in consumer spending, China shutdowns, and more. I would expect a weak quarter from Apple, but what matters more is just how weak it is and if it’s better than feared.

As far as the charts are concerned, Apple has major resistance at $160-165 and this stock needs to break that zone to really correct this downtrend. It definitely has buyers coming in and I would argue is the most likely spot of hope in the Nasdaq and the FAANGs due to the overall buying we are seeing, but unfortunately, a miss and a market maker expected move to the downside could easily equal a break through $150 and lower prices.

Apple is stuck in between two very critical zones and earnings could easily be the catalyst that sets off the breakout!

As FAANG earnings wind up after the close, we’ll have a better answer as far as if these moves have just been one-hit wonders or if we will actually (finally) see decent upside continuation!

Want to learn more? Join me in the Stacked Profits Mastery room for more earnings analysis, in-depth write-ups, trade ideas, and more. 

Don’t forget to check out the chart of Apple in the Hot Zone below!

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