Amazon stock's recent downdraft reflects broader chop in today's stock market — and highlights the importance of caution even with large-cap leaders.
The e-commerce giant offered a potential entry for traders on Feb. 12, when shares approached the 50-day line. Harold Morris, MarketSurge senior product coach, says he was expecting Amazon stock to bounce off the 50-day, but came away disappointed when shares continued their recent decline.
"I thought, OK, I'm going to take that trade in Amazon, hoping it was going to bounce out," Morris told Investor's Business Daily's "Investing with IBD" podcast. He sold his position for a loss this week. "You have to have sell rules, no matter how you're trading, whether you're trading the option or the shares," he said.
Amazon Stock Faces Rivals In E-Commerce And Tech
The recent downtrend in Amazon stock comes amid investor concerns of weakening consumer spending after a disappointing quarterly report from brick-and-mortar rival Walmart.
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Compared with its e-commerce rivals, Amazon stock retains an edge through its massive cloud-computing operations and its forays into advertising technology. The company also is benefiting from the generative AI boom, with investors seeing the company as a notable provider of AI services, infrastructure and compute power needed to run generative AI platforms.
Caught In A Choppy Market
To achieve continued dominance in tech, Amazon is doubling down on its spending, in effect plowing through cash to gain an edge in compute power needed for next-generation technologies. But investors have recently been scrutinizing Amazon stock's spending as rivals like China's DeepSeek reportedly offer similar generative AI for less money.
Morris says investors hoping to profit off quick reversals should heed the warnings of a choppy market and use reasonable investment sizes to minimize losses when trades go awry. "If you're trading shares or an option, you've got to keep your losses small," he said.
"I'm done with it," Morris said. "I move on and look for something else."
Amazon stock is closing below the 10-week line for the first time in more than five months. A bad break of the 10-week line is a notable sell signal. For traders who have held positions since last fall, this week's action means traders should at least sell some shares if not exit the entire position.
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