Splits are an event that really should be a nothing burger. You have one share worth $100 and after an announced date you have 2 shares each worth $50. Six of one, half a dozen of the other, right? It gets a little more complicated than that but there are proven opportunities that you can get in on.
First, the dates are important. Amazon announced it’s 20:1 split on March 9th. You have to own the stock on May 27th to benefit from the split. On June 3rd anyone who owned a share on May 27th will 19 more shares added to each share they owned. Amazon has jumped about 20% since the announcement of the split about two weeks ago. The green circle shows when the announcement was made:
While nothing is guaranteed, this is a pretty typical response to a split being announced. You’ll see that the gap up the day after the announcement. If you can get in at that point, the odds are in your favor you will see a gain. But, this doesn’t happen in a vacuum. You have to look at the patterns of the stock regardless of the split.
This announcement created a move up from a previous area of support with Amazon and has pushed it up past a recent high. Currently it is right at its 200 day moving average. If there wasn’t a split announcement, you may want to wait for the stock to move above the 200 day to confirm it is heading to the next recent high of about 3750.
The question right now is whether or not there is still opportunity left in this trade or if it has all been priced in. By looking at the price pattern without considering the split you can see that we may see some resistance at the 200 day moving average. A logical strategy would be to watch for the move above or see if we pull back. A pull back may provide a nice opportunity to get in and then be able to get the lift that potentially follows the split.
Both Apple and Tesla split on the same day in 2020 and offered a quick gap up the day the split occurred. Both then locked into a sideways move but have provided a nice return from a long term perspective since then. Take a look at your risk profile and consider getting in for a potential quick grab the day of the split or wait an buy in at the lower price for a longer term potential gain.
Keep learning and trade wisely,
Market Wealth Daily