Amazon’s stock to profit from Prime Day in 2020?

October 06, 2020 11:00

After delaying "Prime Day", Amazon's annual shopping event, several times this year, it will finally take place on the 13th and 14th of October.

However, is there any chance that we will be able to draw conclusions from the event in terms of rise (or fall) in consumer demand for financial markets (especially Amazon stock)? Let's see…

Amazon historically bullish in the days before "Prime Day" – and after?

"Prime Day" is not only a big e-commerce spending event in the US, but a massive revenue driver for Amazon as a whole.

For 2019, Amazon reported that its Prime Day was the largest shopping event in Amazon history after selling more than:

  • 100,000 laptops
  • 200,000 televisions
  • 300,000 headphones
  • 350,000 luxury beauty products
  • more than 1 million toys.

Having sold over 175 million items in 2019, Prime Day surpassed its sales for Black Friday and Cyber Monday combined.

That said, it doesn't come as a big surprise that "Prime Day" is economically beneficial to Amazon. However, it is also beneficial to other retailers like Walmart and Target, who have no other choice than to follow suit and to offer similar discount events to somehow profit from the above-average "click traffic" in the e-commerce industry.

When looking at Amazon's stock performance ahead of former "Prime Days", it has usually performed bullish in the two weeks prior to the event, rising on average between 7 – 10%, since the first Prime Day in 2015.

The only "below average" performance was in 2017, when the stock gained "just" 2%.

What will be of higher interest, in our opinion, this year is if the Coronavirus pandemic and the resulting economic uncertainties will have a negative impact on this year's "Prime Day", especially sentiment-wise?

While we will get a deeper look at the results of 2020's Prime Day somewhere in 2021, chances seem high that this year's demand will probably somehow be subdued.

And with Amazon's stock already having performed quite well into the last two weeks of September, holding substantially above 3,000 USD, we imagine a mostly positive Prime Day outcome, which has mostly been priced into the stock of Amazon already.

So, to make a long story short: this year's Prime Day could be a classic "Buy the rumours, sell the facts" for the Amazon stock.

How should you trade #AMZN in this environment?

After the start of the month of September, it was quite weak with the Amazon stock price dropping as much as 18% from its September highs to its September lows. The current bounce could be a classic wave "B" which could end shortly after this year's Prime Day, seeing the Amazon stock facing serious selling pressure over the next two weeks and into the US presidential election.

A projected target of such a wave B can be found around 2,500 USD which could realistically fall together with a re-test of the long-term uptrend and the SMA(200).

An acceleration could and should be expected if Amazon drops below 2,900 USD, so shorting #AMZN with a break below 2,900 USD, Stop above 3,200 USD and targeting for a run as lows 2,500 USD seems like an interesting short-idea with a risk-reward ratio of 1 to 1.33:

Source: Admiral Markets MT5 with MT5SE Add-on #AMZN CFD Daily chart (between May 28, 2019, to October 05, 2020). Accessed: October 05, 2020, at 7:30 PM GMT. Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015, the value of #AMZN increased by 117.78%, in 2016, it increased by 10.95%, in 2017, it increased by 55.96%, in 2018, it increased by 28.43%, and in 2019, it increased by 23.03%, meaning that in five years, it was up by 495.41%.

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