MW Amazon's stock resumes its breakout. Losing some UPS deliveries won't stop it.

By Tomi Kilgore

As chart watchers say, there's nothing more bullish than reaching a record high and Amazon's stock has achieved two-straight record weekly closes

If there was any worry about Amazon.com Inc.'s ability to deliver its goods, after United Parcel Service Inc. said it was slashing the deliveries it makes for the e-commerce giant by more than half, you'd never know it by looking at the stock.

Amazon's stock $(AMZN)$ surged 1.3% to close at $237.68 on Friday. It reached as high as $240.29 in intraday trading, which was above the Jan. 28 record close of $238.15.

There appeared to be some worry among investors about how UPS's $(UPS)$ bombshell announcement might impact Amazon's business. The stock had lost 1% on Thursday, while both the S&P 500 index SPX and the technology-heavy Nasdaq-100 Index NDX rose 0.5%.

But those losses were wiped away, and then some on Friday. And it's not all about the technicals, as there are some fundamental reasons for investors not to worry. (See below)

Many charts watchers will say, there's nothing more bullish than a record high, as there are no historical resistance areas to stand in the way.

There may be some concern about a rally getting a little stretched, however, with the stock soaring 33.2% amid a five-month win streak. But an overbought technical condition at a record high would only warn of a potential short-term pullback, and could actually be a sign of underlying, longer-term strength.

Also read: Meta's stock is the most overbought in 11 years, but that could be a good thing.

Besides, Amazon's stock isn't overbought. It was in mid-December when it had reached fresh highs, and the stock did pull back, but not enough to raise any technical alarm bells. The stock was back at record levels in short order.

The stock is also trading well above both its 50-day moving average - a shorter-term trend tracker - that extended to $221.88 on Friday, and its 200-day moving average - a longer-term trend dividing line - which came in at $194.40. And both moving averages are rising, which is also bullish.

In this technical environment, the moving averages can become levels to "buy on dips."

As Ari Wald, technical analyst at Oppenheimer put it: "We see $220 as near-term support (50-day average) and little identifiable resistance."

Wald also sees the recent shorter-term action as a sign that in a weekly chart, the "multi-year breakout" rally has resumed, which should carry the stock even higher. Through Friday, the stock has achieved back-to-back record closes on a weekly basis.

"Over the coming months, [Amazon's stock] should continue to retrace the underperformance endured between 2020 and 2023," Wald wrote.

Fundamentals support the bullish technicals

If Amazon will feels any impact from the loss of most of UPS's deliveries, it won't be for very long. Keep in mind that when FedEx Corp. $(FDX)$ ditched its air and ground delivery deal with Amazon in 2019, Amazon still saw profit, revenue, unit growth and its stock rise that year.

Also, while UPS said it was cutting back on the partnership for cost reasons, it also costs Amazon to keep those partnerships, and that's why the company has invested so much into building up its own delivery network.

TD Cowen analyst John Blackledge estimates that since 2020, Amazon has invested over $160 billion in its global fulfillment, logistics and transportation network, to support the growth of its e-commerce business. "Within that time, [Amazon] has more than doubled the size of its fulfillment network," Blackledge wrote in a note to clients.

He doesn't expect UPS's move will change Amazon's focus on the speed of delivery.

Colin Sebastian, analyst at Baird, estimates that roughly 70% of domestic deliveries are already completed by Amazon. He says growing that percentage is "one important piece" of Amazon's initiatives to lower unit costs.

"We believe the reduction in third-party deliveries is a natural evolution of the Amazon/UPS relationship, as Amazon's lower-cost regional fulfillment network with same-day delivery hubs allow them to allocate more deliveries to Amazon-affiliated drivers," Sebastian wrote in a research note.

And it's not like all of UPS deliveries are going away, just most of them. Amazon also has other partners to lean on if needed.

"We'll continue to partner with [UPS] and many other carriers to serve our customers," Amazon spokesperson Kelly Nantel said in an emailed statement to MarketWatch.

-Tomi Kilgore

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February 01, 2025 10:58 ET (15:58 GMT)

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