“Turnaround Tuesday” was a welcome sight for retail traders hit with four consecutive losing days in the stock market.

The day didn’t start positive as stocks opened lower, then turned slightly positive by mid-morning, shifted to the downside again, and then by noon were on the way to eking out a positive close.

But the uptick wasn’t enough to discourage bearish sentiment, especially among Simpler’s traders who are playing this market more to the downside.

‘Turnaround Tuesday’ doesn’t offset bearish sentiment

One day of upswing in stock prices doesn’t change the trend in a weak stock.

“Turnaround Tuesday” is a casual term for when the stock market makes an upside move. This is a day where price across the board experiences a significant reversal in trend after several days of decline or stagnation.

This Tuesday proved positive for traders. In the market today, the Dow closed at 32,849.74 points to rise .28% (adding 92.20 points on the day). The Nasdaq dropped to barely improve to 10,547.11 points for a .01% increase (just 1.08 points) while the S&P 500 squeaked higher by .10% to 3,821.62 points.

Allison Ostrander, Director of Risk Tolerance at Simpler Trading, has been tracking one of the former “pandemic darling” stocks that has seen better days. She sees weakness in this stock as strong potential for traders.

“Amazon has been overall weak this year,” Allison said. “Amazon has several different technicals and time frames that look weak and could spark a new run to the downside and in turn could create new lows for the year.”

Amazon.Com, Inc. (AMZN) is one of the companies that reached the trillion-dollar valuation level in the last two years and has since faltered. Amazon has lost $1 trillion in market value since hitting a high of more than $1.8 trillion just 17 months ago.

AMZN did get a boost today, closing higher by .32% at $85.19, down from a high of $171.40 in January. AMZN losses have erased gains achieved during the pandemic when people swamped to shop online during lockdowns. The once darling stock is near its lowest level since March, 2020.

Allison pointed out that AMZN is far below its 100-day simple moving average (SMA) and struggling overall under continued price resistance. She is seeing overall bearish signals and a daily squeeze leaning to downside with intraday signals confirming the weakness.

“There is quite a bit of weakness on this that looks good to potentially play lower, especially if the market is going to roll over,” Allison said. “I certainly still like this to the downside.”

Making plays when big tech stumbles

Allison has an options play on AMZN that is out of the money over the next three weeks with the goal of taking advantage of the weak price pattern.

Allison provided multiple scenarios where traders could put together setups on AMZN using variations of time, theta decay, and risk tolerance for setups.

“I like the cost basis and the risk here,” Allison said. “I think there are several great ways to potentially trade AMZN for a small risk and allow yourself a nice profit potential if in fact we do get that move to the downside.”

As this market continues to flirt with rolling over to the downside, Allison cautions traders to be mindful of taking on unusual risk with any trade.

“Keep your capital risk within your risk tolerance,” Allison said.

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