Amazon.com, Inc. (AMZN) is the online shopping leader, but the company has recently been challenged by a series of scolding tweets sent out by President Trump. One subject is the U.S. Postal Service (USPS). The President believes that the USPS is not paid enough for the last-mile delivery of Amazon shipments. According to Citigroup Inc. (C), the USPS is charging $1.46 below market rates for parcel delivery from third-party services such as Amazon.
Some argue against the accuracy of the Citigroup claim. My take supports the claim. In my small town near Tampa Bay, Florida, the USPS recently built a new distribution center to handle the deliveries from distributors such as Amazon. I live at the entry of a community subdivision of 100 homes, and my office is at the front of my home. I see United Parcel Service, Inc. (UPS) and FedEx Corporation (FDX) trucks enter and leave at least twice a day.
My postal delivery lady has been with us since mid-2009, and for the past couple of years, she now walks packages directly to our door. Her workflow has been made more difficult due to Amazon deliveries. The overflow is done by freelance drivers who work without benefits on a 1099 basis at an hourly rate. I am sure the USPS had to bring on older trucks out of mothballs to handle this. On one Sunday during the holidays, I saw at lease five different USPS trucks making package deliveries during about one hour.
Cost overruns for the USPS are paid by the Federal Financing Bank (FFB), which is within the U.S. Treasury. Outstanding lending for the FFB is $77 billion, of which is $15 billion is for the USPS.
Amazon shares closed Friday at $1,405.23, up 20.2% year to date and up just 11% from the Feb. 9 low of $1,265.93. The stock is in correction territory at 13.1% below its all-time intraday high of $1,617.54 set on March 13. The stock is on recovery mode this morning, trading at $1,427 pre-market. (See also: Trump Reportedly Wants to 'Go After' Amazon.)
The daily chart for Amazon
The daily chart for Amazon shows that the stock set its all-time intraday high of $1,617.54 on March 13, which led to a "key reversal," with a close of $1,558.18 that was below the March 12 low of $1,586.70. The stock gapped below its 50-day simple moving average $1,466.44 on March 28. On April 6, the stock closed below my quarterly pivot of $1,446.99.
The weekly chart for Amazon
Courtesy of MetaStock Xenith
The weekly chart for Amazon is negative, with the stock below its five-week modified moving average of $1,449.43. The 12 x 3 x 3 weekly slow stochastic reading declined to 74.85 last week, down from 84.24, falling below the overbought threshold of 80.00. The stock had been above an "inflating parabolic bubble" that popped during the week of March 23.
Investors should buy Amazon shares on weakness to my semiannual value level of $1,049.55 and reduce holdings on strength to my quarterly pivot of $1,446.99. (For more, see: Buy Amazon.com on the Decline: Wall Street.)