How to use Amazon to position for the rebound in stocks to extend

Last week, U.S stock markets rebounded from oversold levels supported by end of month, end of the quarter and end of financial year rebalancing flows and by softer economic data.

The softer patch of data has flamed fears of an imminent recession while at the same time raising hopes the Fed will pivot from its hawkish rate-hiking path earlier than expected. This is a reprisal of the stock market playbook last rolled out during Covid, whereby bad news is viewed as good news, as it prompts a dovish central bank reaction.

Notably, last week’s recovery has undone a good chunk of the damage that followed the higher-than-expected U.S CPI and inflation expectations prints on June 10. The Nasdaq is above the level it closed that day, and U.S 10-year yields have given back a good chunk of their post-CPI gains.

Presuming the Fed’s preferred measure of inflation, the core personal consumption expenditures price index (PCE) to be released on Friday doesn’t exceed expectations, there is room for the stock market rally to continue this week and into July as new money is committed to the market for the start of the new financial year.

To position for this, we favour using fallen tech giant Amazon which at the recent double low near $101 (from mid-June) was trading 46% below its bull market $188 high. As a side note, the share price of Amazon has frequently turned in the past after making double lows and double tops.

Consider opening longs on a dip to $112 with a stop loss placed at $99.00. The profit target is the band of resistance between $130.00 and $135.00, viewed on the chart below.

Source Tradingview. The figures stated are as of June 27 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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