Amazon is trying to confirm a breakout above the $3400 level and a channel resistance. The stock was down 1.22% yesterday but is pointing to a rise of 0.32% at today’s open.
The rally in Amazon from the coronavirus panic-selling has been impressive, but investors are now starting to question an index that is dominated by only a handful of players. The combined market cap of the five biggest companies in the S&P500 – Amazon, Apple, Facebook, Google and Microsoft – npw accounts for 25% of the entire index, which is a 5% gain from the pre-virus highs.
The technology players have dominated the market as their business models have been relatively unscathed from the lockdowns, but there are also calls for tougher regulations over their growing monopolies. The creator of the Fortnite video games, Epic Games, were the latest to challenge the dominance of the big players with their criticism of Apple. The companies have also been under scrutiny by U.S. lawmakers, with litigation against Google possibly coming later in the year.
The Amazon share price is up over 80% this year, whilst the average S&P500 firm is down 4%. The risk for the index is that a tech-based sell-off could see violent price action if a rush to the exits was seen from institutional investors. This is a possibility with the retail investor frenzy that has gripped the market since the virus lows in stocks. History has seen many instances where retail money become the bag holders when big losses are seen.
Amazon’s stock price gains this year are not without merit as the company saw revenues up 40% in the second quarter. The lockdown of small businesses and consumers, coupled with many being scared to leave their home, has led to a further increase in market share for the Seattle, Washington-based giant.
Amazon Technical Outlook
AMZN has moved above the $3400 level recently and this is the first support level that needs to hold. If the stock moved below there then support arrives at the trendline around the $3250 figure. Investors should be careful about holding there or taking on fresh longs because a break a correction to the $3000 level could happen quickly in a broad market sell-off.
Amazon Weekly Chart