Amazon's (NASDAQ 🙂 earnings, released in late July, were at an all-time high.
That is of course no accident. Consumers stuck at home, or now cautiously returning to their offices amid persistent peaks of the coronavirus, have opted to shop online rather than go back to brick-and-mortar stores – if those establishments are actually even open.
And based on the rising valuations of a variety of technology stocks, investors are betting that most people will stay close to home for quite some time. The current and projected market caps of some of the largest US tech companies, whose output enables work, entertainment and yes, shopping, from home – including Microsoft (NASDAQ :), Apple (NASDAQ :), Netflix (NASDAQ 🙂 and Amazon – have swelled to extremes of the calling era while the worst pandemic in 100 years is raging.
The value of listed companies has risen $ 2.9 trillion in this year's time, suggesting investors expect social distance to become more permanent, giving technical solutions to everything, including shopping, a higher priority in the new, contactless world.
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Stocks of the Seattle-based e-tailer may have completed a falling flag, bullish as they rebounded from the uptrend since the March bottom. Note, however, that the price can actually form an ascending triangle that should not cause an upward breakthrough just yet (dotted line).
Volume suggests the flag scenario is correct as the earlier outbreak coincided with the highest volume peak since May. However, the volume has declined since then.
Still, we are optimistic about the stock, but that doesn't mean that a wide market sell-off – if and when that happens – won't take Amazon down.
Trading Strategies
Conservative traders would wait for an upward breach of the rising triangle, whose penetration would surpass its July 13 high. That would include a 3% penetration, preferably on a trailing basis, to filter out a bull trap. They would also wait 3 days for the price to stay above the cartridge, adding a time filter to the price depth. In addition, they would wait for a return to the pattern.
Moderate traders would also wait for the Rising Triangle to complete, but would be satisfied with a 2% penetration and a 2-day filter. They too could wait for a pullout, for a better entry, if not evidence of trend.
Aggressive traders can rely on the flag breaking out. They can wait for the triangle to break out or a return to the flag for easier access.
Trade Sample
Imports: $ 3,100
Stop Loss: $ 3,000
Risk: $ 100
Target: $ 3400
Reward: $ 300
Risk: Reward Ratio: 1: 3
