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Trends & Analysis
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News

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Asset Watch

Should you average into Amazon?

Thursday, October 5, 2023

We recently noted that Amazon confronted weekly resistance near $140, which made its short-term outlook highly ominous. But, after ending the Oct. 3 session down by almost 15% from its September high, is it time to flip bullish?
UBS analyst Lloyd Walmsley increased his price target from $175 to $180 on Oct. 2, telling clients, “We think the insertion of video ads into Prime Video content will unlock substantial revs (revenues) at high incremental margins, bolstering the margin bull case.”
He added:
“Our conversations with contacts familiar with the offering view this as a transformation of the CTV (connected TV) landscape, as Prime Videos reach [roughly 200 million] users globally.”

With the fundamentals still resilient, technical support could also be on the horizon, as seen by Amazon’s 40-week moving average which has been meaningful support and resistance since mid-2021. The key level is roughly 7% below the Oct. 3 close, so it should end the recent slide unless U.S. Treasury yields continue their rapid rise.

 

To manage your risk, it may be prudent to dollar-cost average into the position. Instead of putting all your money in at once, you could invest 1/3 at a time and obtain a lower average price if Amazon’s drawdown continues. If the stock recovers, you’ll still enjoy a small gain.

 

Will Amazon prosper in the months ahead, or will it fail to recapture its 2023 highs?


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