While there’s simply no denying the remarkable ascent of e-commerce and technology juggernaut Amazon.com Inc. AMZN, even the biggest stalwarts of industry are not completely immune to broader fundamental pressure. As the U.S. economy struggles under the weight of elevated inflation and trade tariffs, AMZN stock finds itself caught in a sentiment tug-of-war.
On one hand, analysts can easily argue that the e-commerce behemoth represents the best house in the worst block. While consumers overall may be struggling to make ends meet, Amazon still commands the enviable moat of being the leading online retailer and marketplace for third-party sellers. True, the company is making inroads into other ventures. However, approximately 75% of Amazon’s revenue is tied to its core retail business.
At the same time, the company’s Amazon Web Services (AWS) is a profit engine. Furthermore, cloud adoption is rising across various industries. With AWS representing one of the top global cloud brands, Amazon is in an excellent position to grab additional market share. As such, its growth curve can accelerate alongside its profitability metrics.
On the other hand, the trajectory of AMZN stock has been far less impressive in recent sessions as compared to prior years. Since the beginning of January, AMZN is down about 7%. In the past 52 weeks, the equity has only gained about 11%, a rather pedestrian figure that has been eclipsed by the S&P 500.
Financially, a major concern about the mainline e-commerce business is the razor-thin margins. While retail drives the top line, the profit margins are under pressure – a situation that’s exacerbated by inflation and tariff threats. Smart money investors also appear to be betting skeptically about AMZN stock, with sentiment recently turning bearish in the options market.
The Direxion ETFs: With AMZN capable of moving sharply in either direction, speculators seeking the possibility of quick profits may consider Direxion’s Amazon-focused exchange-traded funds. Specifically, aggressive optimists may consider the Direxion Daily AMZN Bull 2X Shares AMZU, which seeks 200% of the performance of the namesake equity. On the other end, the bears may consider the Direxion Daily AMZN Bear 1X Shares AMZD, which is an inverse fund of AMZN.
Primarily, the utility of the AMZU and AMZD ETFs centers on convenience. Typically, speculators interested in either leveraged wagers or short positions must engage the options market. While derivatives offer incredible flexibility, they can also be complex instruments. With Direxion ETFs, these units can be bought and sold much like any other public security, thus mitigating the learning curve.
Still, prospective investors must be aware of the unique risks of Direxion’s leveraged and inverse ETFs. First, these products can be unusually volatile, so caution is warranted. Second, these funds are designed for exposure lasting no longer than one day. Beyond this recommended holding period, investors may incur value decay due to the daily compounding effect.
The AMZU ETF: After starting off the year auspiciously, the Direxion Daily AMZN Bull 2X Shares stumbled under the economic pressure, falling about 23%.
- With the Trump administration making progress regarding trade policies, AMZU has enjoyed robust near-term momentum, gaining almost 46% in the trailing month.
- Currently, AMZU is trading above its 50-day moving average (DMA) but below its 200 DMA. Moving forward, its next natural target is the $35 level.
The AMZD ETF: Tripping out of the gate, the Direxion Daily AMZN Bear 1X Shares started looking lively later in the year as tariffs spared broader bearishness.
- In contrast to its bullish cousin, the inverse AMZD ETF has struggled in the past month, losing nearly 19% of market value.
- At the moment, AMZD finds itself below both its 50 and 200 DMAs. Ideally, the ETF must get above the $13 level soon to avoid serious technical damage.
