Midweek share roundup: AMZN and GOOGL
‘Risk on’ has reasserted itself decisively today, with gold and silver declining significantly and oil, shares and other riskier instruments posting gains. The focus after hours today for stock markets is on Amazon and Google’s earnings reports. This midweek share roundup looks at AMZN and GOOGL, the representative CFDs based on the prices of these two shares.
Both Amazon and Google posted strong earnings per share (‘EPS’) in the first three quarters of 2020, beating the consensus significantly for the second and third quarters. GOOGL’s price:earnings ratio (‘PE’) for 2020 is estimated at about 36, making it about average for overvaluation among major tech shares. However, estimated PE for AMZN last year is 96.5, making it very strongly overvalued by this measure.
Today’s gap up by AMZN at opening suggests the possibility of a breakout from the range. The last new high reached by Amazon’s shares was around $3,550 in August 2020; since then there has been a fairly wide range in view on the chart. The test of the 61.8% area of the weekly Fibonacci fan seems to have failed for now, so if earnings come in significantly better than the consensus we might expect to see more gains.
The estimate for Q4’s EPS is $7.05, with predictions ranging from $4.58 up to $10.01. If there’s a positive surprise, the latest all-time high around $3,500 seems to be in view over the next few sessions unless there’s a significant change in sentiment. To the downside, several key supports could prevent a deep retracement: these include the 61.8% Fibo fan as noted above plus the 50 and 100 SMAs. Given that overbought is only indicated by Bollinger Bands for AMZN on this timeframe, it seems to have more potential for growth than GOOGL over the next few weeks from a purely technical standpoint.
Unlike AMZN, GOOGL has posted relatively strong ongoing gains since September last year, reaching a total of four new highs as of today’s open. One might reasonably suppose that the significantly lower price per share and lower overvaluation have made GOOGL more attractive than AMZN to many investors focussing on big tech/FAANG. However, Alphabet Inc’s earnings have nevertheless been good in 2020.
This chart displays overbought from the presence of price outside the upper deviation of Bands, but we can also observe a strongly overbought stochastic for much of the fourth quarter of last year. Some technicians would also consider movement outside the upper zone of the weekly Fibonacci fan to be an indication of buying saturation. Regardless, the technical picture remains strong overall, with moving averages giving a strong buy signal. Volatility has been somewhat higher over the last fortnight, but this is understandable in the context of some retail traders’ frenzied activities last week and earnings coming up tonight.
The consensus for GOOGL’s EPS for Q4 is $15.91. Estimates range from $14.95 to $18.82. There is no clear resistance in view other than the psychological area of $2,000, so turning to Fibonacci extensions might help to inform some strategies on what to aim for over the next few weeks. If there’s a negative surprise tonight or ‘buy the rumour, sell the fact’, one might expect a bounce or at least a pause around the 50 SMA from Bands.
Midweek share roundup: summary
The technical picture for both AMZN and GOOGL looks strong at the time of writing, with more gains in view assuming earnings are broadly in line with the consensus and ‘risk on’ holds over the next few days. In practice, though, buying in at the top is normally a big risk, which makes AMZN arguably the better option of these two shares for many traders at the moment.
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