On July 2nd I shared a trading idea of a quick profit off of Amazon Prime Day. In short I believed excitement about the upcoming Amazon Prime Day (July 11th) would push the company’s share price up above $1,000. This was no sure bet since this was only the third annual Prime Day so there was no real historical pattern to trade on. Also, there had been a great deal of negative sentiment towards Tech stocks (although Amazon isn’t really a tech stock) and the market in general lately.
I entered the trade at $973 on the morning of July 3rd and was promptly rewarded with a falling share price for the rest of the trading day. It got down as far as $951/share. My stop loss was at $950 so I was definitely very nervous about the trade on this first day. The one right thing I did do was not to allow human psychology to take over and just exit the trade early and take the loss, I kept true to my stop loss.
The market was closed for July 4th and the price action improved only somewhat on the 5th and 6th. However as you can see via the above chart there was a nice price climb starting on the 7th.
Amazon Prime Day was super successful with record breaking sales and shoppers. The stock rallied as I hoped it would and I exited the trade at $1001.50. This was short of my target of $1,005 – $1,010 per share. I admit I made a mistake and let human psychology win, I saw the trade was positive on Wednesday morning and I pulled the trigger to lock in the profit. Later that day AMZN traded above $1,008/share and closed above $1,006. I should have maybe set a stop loss at $1000 and watched to see if the share price climbed to my target. If I was more patient and strategic I could have maybe squeezed an additional $5 out of the trade.
I made a 2.86% return on this trade, a trade I had on for only seven days (ten calendar days). The S&P 500 returned 0.49% during this period and the Nasdaq 1.42%. Superb results!
Trading vs. Investing
I want to be crystal clear: this was a trade, not an investment! An investment is long term, this was just a quick flip. I had a catalyst for the trade, timeline, stop loss and a defined target. I still own Amazon as an investment, I purchased it months ago at $816/share. However, this was a separate purchase, a quick trade for what turned out to be a decent profit.
I haven’t traded a stock like this for many, many years and I’m happy with the results after such a long time off. Hopefully I’ll be able to generate more good trading ideas in the near future. I have to admit though beyond ideas my biggest hurdle may be overcoming human psychology. Emotion can ruin a good trade, thankfully I didn’t succumb and allow my emotions to take me out of this winner.