Tech And Economy Collide To Facilitate Rich Trading Grounds For Direxion's AMZU And AMZD Funds

Amazon.com, Inc. AMZN helped enliven an otherwise flat session on Wall Street Tuesday. Shares of the e-commerce and technology juggernaut moved up slightly over 1% in late afternoon trading. Driving the push forward for AMZN stock was news of the underlying enterprise announcing a collaboration with chipmaker Intel Corp. INTC at the start of the week.

According to Benzinga's Erica Kollmann, the online marketplace announced after yesterday's closing bell that Intel will produce an artificial-intelligence fabric chip for Amazon Web Services (AWS). This latest directive represents an expansion of a prior collaboration. Notably, AWS and Intel have forged a partnership that extends over 18 years.

On another note that could potentially benefit AMZN stock, Amazon's pre-holiday savings event — known as Prime Big Deal Days — will return on Oct. 8 and Oct. 9. With the latest U.S. jobs report falling short of expectations, concerns exist regarding the stability of the economy. Therefore, a sales event may help instill confidence in Amazon and the broader consumer discretionary market.

Still, the tech giant has also walked into some controversial waters. AMZN stock was shaky on Monday following management's announcement that it will end remote-work privileges next year. Amazon CEO Andy Jassy will call all employees back to the office five days a week beginning in January. In addition, the company will slash management layers.

Another headwind to consider is inflationary pressure. During the immediate aftermath of COVID-19, consumers opted for online shopping platforms for safety and convenience reasons. However, as soaring prices hurt the wallet, analysts have reported spending declines for discretionary items. This obstacle could negatively affect key financial metrics, especially the aforementioned Prime Big Deal Days.

The Direxion ETFs: Nevertheless, contrasting sentiments offer rich trading grounds for exchange-traded funds. In particular, those who believe that Amazon can overcome its wall of worries may consider the Direxion Daily AMZN Bull 2X Shares AMZU. On the other end of the spectrum, investors who anticipate a downturn may profit from the crimson ink with Direxion Daily AMZN Bear 1X Shares AMZD.

To be clear, both ETFs should only be held for periods lasting no longer than one day. With leveraged funds or an inverse ETF (as is the case with AMZD), the daily compounding of risk can potentially create dissociations between expected and actual performance. For example, a classic mechanical wristwatch may keep time perfectly fine when wound. But over an extended period, some time slippage may occur.

The AMZU ETF: Direxion's 2X-leveraged Amazon fund has been a solid performer this year, gaining over 24% since the beginning of January.

• Since dropping to a closing low this year of $25.12 on Aug. 5, AMZU has launched an impressive comeback. In the past five sessions, momentum has carried shares to over 7% up.
• However, the 2X fund appears to be struggling at the $33 level, which coincides with a prior support line. Given the significance of this milestone, it's important for the bulls to drive even higher.

The AMZD ETF: With AMZN stock continuing to perform well despite broader pressures, AMZD slipped more than 21% since the start of the year.

• After seeing an impressive start to August, AMZD slipped below its 200-day moving average. More recently, volatility has sent the inverse ETF below its 50 DMA.
• Nevertheless, the one positive is that AMZD appears to be sitting on a support line roughly situated at $14. Any negative news could send the inverse fund higher, making it a must-watch vehicle.

Featured photo by Preis_King from Pixabay.