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Game on Amazon? Maybe not so fast

First books. Then drones. And now video games?

In the latest twist in the never-ending saga that is Amazon, the online retailer's announced $970 million purchase of Twitch Interactive, a digital network that allows users to watch other people play video games, moved the company away from selling games and into playing them. And some market participants think the initiative could open up huge new markets for the Seattle-based retailer.

"Twitch is important to Amazon because it opens up a new space for them," said Gina Sanchez, founder of Chantico Global. "This actually could put them somewhere closer to building up the capability to move into live television with the infrastructure that Twitch brings to them."

According to Sanchez, Twitch's 55 million unique users is only part of the story. Sanchez says the acquisition gives Amazon the ability to expand into live entertainment and content. "Amazon has a small advertising segment now that they're building out," she said of Amazon. "This is important to that story and could be game-changing for Amazon."

Yet, if there has been one constant complaint about Amazon, it's the company. The e-commerce retailer is great at generating sales but doesn't make enough profits because it continually spends money on building and expanding into new businesses. In the last four quarters, the company reported just $181 million in net income on $81.76 billion in revenue. In the second quarter of 2014, Amazon showed a loss of $126 million on revenueof $19.34 billion. On the day Q2 earnings were reported at the end of July, the stock plunged 10 percent to close at $324.01. It closed at $341.83 Tuesday, but still has yet to fully recover. The charts, according to one technician, are painting a bleak picture.

"That gap down from the July 24th earnings –that was nasty," said Todd Gordon, founder of TradingAnalysis.com. "It's been kind of a weak recovery. In fact, it has only managed to recover about half of that gap on declining volume which, in all fairness, it is the end of August so we're not going to see robust volume. But minus a closure of that gap up around $360, Amazon is a technically-damaged stock."

In other words, according to Gordon's charts, Amazon's stock would need to break $360 and recover those losses before it can make a meaningful move higher.

"If we can't get back up to $360, then you got to think we're going to go back down to those gap lows – maybe down to the even $300 level."

To see the full discussion on Amazon, with Sanchez on the fundamentals and Gordon on the technicals, watch the above video.

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