Watch These Amazon Price Levels as Stock Drops on Cloud Revenue Miss, Tepid Sales Outlook

Amazon's (AMZN) shares took a hit in extended trading on Thursday after the tech giant reported cloud computing revenue below expectations and issued a tepid current quarter outlook. The stock's projected open on Friday sets the stage for a possible retest of a rising wedge pattern's lower trendline. Investors should keep an eye on key support levels around $230, $216, and $200, as well as a measured move price target at $290 if the stock resumes its longer-term uptrend.

Amazon's cloud computing revenue growth slowed to just under 19% year over year in the fourth quarter, barely missing analysts' estimates. The company's revenue forecast for the first quarter also fell short of Wall Street expectations, with executives citing a significantly unfavorable impact from foreign exchange rates. Despite the setbacks, Amazon's shares have gained roughly 9% since the start of the year and trade more than 40% higher over the past 12 months.



Amazon's chart shows a rising wedge pattern that has been in place since July 2022. The stock has found support multiple times near the pattern's lower trendline and 50-day moving average (MA). However, during recent trading sessions, the stock has traded towards the wedge's upper trendline but was unable to stage a decisive breakout ahead of the company's quarterly results. Additionally, the relative strength index (RSI) failed to register a new high, creating a bearish divergence between the price and indicator, which suggests waning buying momentum.



Investors should monitor the following key support levels:

1. $230: Although the stock is projected to open slightly below this price on Friday, the area may attract buying support near the rising wedge pattern's lower trendline.
2. $216: If the bulls' inability to defend the above level leads to a sell-off, the shares could slip to around $216. This area on the chart may provide support near the November peak and January trough.
3. $200: A more significant correction could bring the psychological $200 round number into play. Investors could seek to accumulate shares in this region near the early July swing high and late November swing low, which also sits in close proximity to the upward sloping 200-day MA.

If the stock resumes its longer-term uptrend, investors can forecast a price target by applying the measured move technique. By adding the depth of the rising wedge ($50) to the pattern's upper trendline ($240), we project a target at $290. This level could serve as a potential profit-taking opportunity for investors.

In conclusion, Amazon's shares are facing a challenging environment following the company's cloud computing revenue miss and tepid sales outlook. Investors should closely monitor the stock's price action around the identified support levels and consider the measured move price target if the stock resumes its uptrend. By staying informed and vigilant, investors can make well-intained decisions regarding their Amazon holdings.