Online retailing is front and center in the minds of investors and retail consumers this week because of Amazon.com, Inc.'s (AMZN) Prime Day. Many predictions have the two-day event pegged to bring in more than $5 billion in sales for the company. In this article, we'll take a look at the charts from across the sector and try to determine how active traders will be positioning themselves over the weeks or months ahead.
Amplify Online Retail ETF (IBUY)
Investors who become interested in a market segment are often drawn to it because of a news event such as Prime Day. However, what is really noteworthy about this week from the perspective of investors is the clear evidence of the rising level of dependency that consumers have on buying goods and services online. Those looking to gain exposure to this powerful trend may want to consider looking into exchange-traded funds such as the Amplify Online Retail ETF (IBUY), which was designed to track the EQM Online Retail Index, comprising companies that obtain 70% or more of revenue from online or virtual sales.
As you can see from the chart below, the fund has recently moved above the resistance of its 200-day moving average and is now testing the resistance of a symmetrical triangle pattern. Traders will keep a close eye on the dotted trendline because a close above it could trigger a flood of buy-stop orders and mark the start of a sharp move higher.
Amazon.com, Inc. (AMZN)
Prime Day is a definite boon for Amazon, as it helps cement the company's spot at the top of the online retailing world. As you can see from the chart below, Amazon's share price has moved above its 200-day moving average, and the bullish momentum was enough of a catalyst to spark a crossover between two long-term moving averages.
The crossover between the 50-day and 200-day moving averages is referred to by followers of technical analysis as a golden cross and is often used to mark the beginning of a major uptrend. The more recent break beyond the support of an influential trendline will likely be used as confirmation of the move higher, and perhaps the events of this week will add enough fuel to the momentum to send the price to new all-time highs.
eBay Inc. (EBAY)
Another popular company in the online retailing space is eBay Inc. (EBAY), which has also seen its share price rise above the influential 200-day moving average. The move higher also triggered a bullish crossover between the 50-day and 200-day moving averages in March, but the price trended sideways for several months rather than higher like many were expecting.
While the period of consolidation may not have been expected, the bulls did recently manage to send the price higher, and based on the chart, eBay stock looks poised to make a significant run higher. From a risk management perspective, traders will likely set their stop-loss orders below one of the lower trendlines, or the 50-day or 200-day moving averages, depending on risk tolerance.
Overstock.com, Inc. (OSTK)
Another chart from within the online retail space, which is also the top holding of the IBUY ETF that could be worth a closer look, is Overstock.com, Inc. (OSTK). Taking a look at the weekly chart below, you can see that the price has been stuck within a defined descending channel since early 2018. The price break beyond the trendline on higher-than-average volume suggests that the bulls are now in control of the long-term trend.
The Bottom Line
Physical and online retailing has traditionally been slow during the doldrums of the summer months, but Amazon's Prime Day is trying to change that story. Based on the charts discussed above, it appears as though the strategy may be working and that now could be a good time for active traders to buy based on lucrative risk-to-reward ratios.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.