Amazon (AMZN) stock sold off this week as the Nasdaq gets hit by the news of a vaccine for the coronavirus. Investors are now talking of a great rotation into ‘bricks and mortar’ and value stocks.
The Nasdaq 100 led the markets higher from the March lows as online shopping grew and new players emerged on the scene to service the ‘work from home’ movement. Amazon was a key beneficiary of this with the company seeing revenues grow from $75.4bn in the first quarter to $96.14bn in the third quarter. Many shoppers were either locked down or afraid to leave their homes. If a vaccine comes by year-end and ends the lockdowns then physical retailers will see a rebound, which is why the Dow is outperforming this week.
Alongside strong earnings, Amazon’s Prime Day sales event was also a big success as consumers spent billions more than expected. Spending on Amazon.com increased by 36% in the U.S. compared to 2019.
Amazon’s fourth quarter earnings should be strong as a vaccine will not arrive before year-end and Europe is still in lockdown until early-December. There is still some headline risk related to the vaccine schedule and instead of holding the shares into the Q4 earnings, traders may “sell the rumor,” while big money investors will have one eye on end of year position squaring and may look to take profits from some of the 2020 tech winners and rotate into value stocks.
Amazon Technical Outlook
Amazon has struggled at the top of the channel resistance and the $3400 level in recent weeks and the vaccine news puts pressure on longs. A bearish close this week could open up a move to the $2600 level. The $3000 level will determine whether bulls can hold the stock up. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.