Amazon stock trading after news of 20-to-1 stock split
Amazon (AMZN) – Get the report from Amazon.com, Inc. stole the headlines — at least for a few moments — on Wednesday after the close. It came as the company announced a 20-for-1 stock split and $10 billion buyout plan.
Given its market capitalization of $1.4 trillion before today’s slight 5% rally, the buyback is less important than the stock split.
Investors call for Amazon stock split for years but have demanded it strongly over the past 12 months or so. Unfortunately, some wonder if it is too little, too late.
A year ago, the company was stagnating, but the “risk” mindset was still going strong. A split in Jeff Bezos & Co. shares would likely have propelled the stock to new all-time highs.
Bezos doesn’t care about splits, as we’ve seen Amazon shares balloon toward $3,775 near their highs. When new CEO Andy Jassy took over in the summer of 2021, the bulls again thought a stock split might be on the table.
It is now, but it should have happened sooner.
It’s a different climate for Amazon’s stock split
When Apple (AAPL) – Get the Apple Inc. and Tesla (TSLA) – Get the Tesla Inc report announced their stock splits in the summer of 2020, shares soared.
Over 14 sessions, Tesla stock rose more than 80% until its split date. For Apple’s share, the stock rose more than 34% between the announcement and the actual split date.
But now we are in a different climate. In the summer of 2020, the bulls controlled the market, the momentum was on the upside, and this was a major “risk on” environment.
2022 is not the same climate – at all. This is a very “risky” environment right now as volatility is high and multiple headwinds plague the market, especially the Nasdaq.
Earlier this year, Alphabet (GOOGL) – Get the Class A report from Alphabet Inc. (GOOG) – Get the Class C report from Alphabet Inc. announced a 20-to-1 stock split. Combined with a strong quarterly report, the news was enough to push the stock up 10.1% to all-time highs.
However, the title could not hold onto these gains for long. Just five days after the earnings release and the stock split announcement, Alphabet stock was lower than it was before the news.
In other words, the climate has changed. Although stock splits do not make the company more valuable, it tends to increase demand for the stock and in a market driven by supply and demand, this is important.
In this environment however, demand for stocks is down and unless stock markets bid heavily and demand picks up, Amazon shares could continue to struggle despite the good news.
Trading Amazon Stocks
On Tuesday, Amazon stock broke through the January 2021 low near $2,707. However, the stock was able to close above that mark, technically giving traders a bullish reversal to work with.
Despite strength in the overall market on Wednesday — with the S&P 500 and Nasdaq up 2.6% and 3.6%, respectively — Amazon only posted a 2.4% gain.
Still, that left the Amazon trade untouched on the long side, at least for a continued rebound.
Together with today’s news, this propels stocks above the key $2,880 zone, as well as the 10-day moving average. I consider these two levels critical.
The 10-day moving average marks the short-term trend, and clearing that mark raises hopes that Amazon shares can reverse the current downtrend. The $2,880 area was a former support turned resistance.
Now back above, the hope is that this level can return to support.
Losing both the 10 days and $2,880 opens up Amazon’s stock for possible gap filling to $2,805.
You don’t think that will happen? It may not be, but just look at Alphabet’s stock. Despite the recent two-day gain, shares are still down nearly 5% from the closing price before earnings — the same earnings date the company announced its stock split.
Below $2,800, the $2,707 zone comes back into play.
If Amazon is going higher, $3,000 to $3,070 is a big area to clear. Granted, that’s a wide range, but that’s where the 10-week, 21-day, and 50-day moving averages come in, as well as the daily VWAP measurement.
Above that puts $3,185 on the table.