Amazon Prime Day

Trading Amazon Prime Day

Next Tuesday July 11th is Amazon’s third annual Amazon Prime Day. Amazon Prime Day is an ingenious sales event that Amazon created to drive sales on a random day in the middle of the year. Think of it as Black Friday but for no reason…there is obviously no holiday attached to it.

Amazon (AMZN) Chart

I’m thinking Amazon Prime Day could be a good trading opportunity. Friday Amazon (AMZN) closed at $968, down -4.2% from its closing high of $1,010.27 on June 8th, only 15 trading days earlier. Since June 8th, Amazon has closed above $1,000 on two other occasions, a before June 8th it had also closed above $1,000¬†twice. My theory is AMZN’s share price could climb back to over $1,000 in anticipation of Amazon Prime Day.

There is not a lot of history to look back on for this trade since this is only the third year. Last year in the run up to Prime Day Amazon did outperform the S&P 500, but the stock was already performing well so you can’t directly attribute the performance to Prime Day.

Amazon vs S&P Pre Amazon Prime Day

I believe with the recent downturn in Tech and the S&P 500 the market is craving a feel good story and a robust Amazon Prime Day would be just what the doctor ordered. Plus, the market hasn’t provided many escape hatches for traders – there are not a lot of strong sectors to pick from. Last month, besides finance and healthcare, it was hard to find a category it was hard to find a category with a decent return. If my read of the market is correct this would lead to traders crowding into Amazon hoping for some good news and a corresponding pop in the stock.

Strategy

Barring some unforeseen event I’ll enter a position into Amazon on Monday June 3rd. I suspect the markets will be quiet tomorrow due to the July 4th holiday on Tuesday. Friday’s closing price appears to be around the recent support level, so I would hope there is no significant risk to downside, I’ll set a stop loss at $950, which is about a 2% loss. I want to see the stock get back above $1000, maybe exit between $1005 and $1010. I’m risking $20 for the chance to make $35 to $40.

Beyond a 2% loss, the additional risk here is Amazon Prime Day is not a catalyst for the stock. If so the stock would neither trade up or down and thus my effort will only result in a small profit or loss. I think the odds are in my favor for this trade, we will see if it works out very, very soon.

PaperChase365

 

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