Amazon.com, Inc. (AMZN) injected some life into a subdued Wall Street on Tuesday, with shares climbing slightly over 1% in late afternoon trading. This upward movement was fueled by news of the e-commerce giant’s collaboration with chipmaker Intel Corp. (INTC), announced earlier in the week. Amazon revealed after the market closed on Monday that Intel would be manufacturing an artificial intelligence fabric chip for Amazon Web Services (AWS), marking an expansion of their existing 18-year partnership.
Adding to the potential for AMZN stock growth is the upcoming Prime Big Deal Days, Amazon’s pre-holiday savings event, scheduled for October 8th and 9th. While the recent U.S. jobs report fell short of expectations, raising economic concerns, a major sales event like this could instill confidence in Amazon and boost the consumer discretionary market.
However, Amazon has also faced some headwinds lately. AMZN stock experienced volatility on Monday after the company announced it would be ending remote work privileges next year, requiring all employees to return to the office five days a week starting in January. This policy, combined with the company’s decision to streamline its management structure, has raised concerns among some employees and investors.
Inflationary pressure presents another hurdle. While consumers flocked to online shopping platforms during the pandemic for safety and convenience, soaring prices have taken a toll on wallets, leading to reported declines in discretionary spending. This could negatively impact key financial metrics, potentially even affecting the success of Prime Big Deal Days.
Despite these challenges, Amazon’s recent positive developments offer opportunities for investors, especially those considering leveraged ETFs. For those bullish on Amazon’s ability to overcome its obstacles, the Direxion Daily AMZN Bull 2X Shares (AMZU) presents an attractive option. Conversely, investors expecting a downturn may find the Direxion Daily AMZN Bear 1X Shares (AMZD) more appealing. It’s crucial to remember that leveraged funds and inverse ETFs, like AMZD, carry significant risk due to daily compounding. This can lead to discrepancies between anticipated and actual performance, similar to the gradual time slippage in a mechanical wristwatch.
AMZU, Direxion’s 2X-leveraged Amazon fund, has been a strong performer this year, gaining over 24% since January. After reaching a low of $25.12 on August 5th, AMZU has rebounded significantly, climbing over 7% in the past five sessions. However, the fund seems to be facing resistance at the $33 level, a previous support line. For AMZU to continue its upward trajectory, bulls will need to push the price higher.
AMZD, on the other hand, has experienced a decline of over 21% since the start of the year, despite AMZN stock’s overall positive performance. Although AMZD saw a promising start to August, it fell below its 200-day moving average. Recent volatility has driven the inverse ETF below its 50 DMA. The one bright spot for AMZD is its current position on a support line around $14. Any negative news could propel the inverse fund higher, making it a closely watched investment vehicle.
In conclusion, Amazon’s future remains uncertain, with both positive and negative forces at play. While the AI chip deal and Prime Big Deal Days offer potential growth, concerns surrounding the economy and Amazon’s new office policy create uncertainty. Investors seeking to capitalize on these conflicting sentiments can turn to leveraged ETFs, but it’s important to understand the associated risks and proceed cautiously. The coming months will reveal how these factors ultimately shape AMZN’s trajectory and its impact on the broader market.
