US stocks remain turbulent as investors fight through endless headlines related to the trade war. The Daily Breakdown digs in.
Tuesday’s TLDR
- Tariffs send stocks spiraling
- There are pockets of strength
- AMZN looks for potential support
What’s happening?
Several times this year, we have talked about investors needing to realize that we’re in a different market environment than we were last year. Yesterday’s action again highlighted this fact, as the S&P 500 tanked to its worst day so far in 2025 after more tariff talk echoed out of the White House.
This is not the same market from 2024. Volatility is elevated and the action is much choppier.
It’s where short-term traders can do well, medium-term swing traders can struggle, and where long-term investors are presented with opportunities — provided they can stomach the ups and downs.
In these environments, remember what type of investor you are and what type of timeframe you are utilizing. Consider using smaller position sizes to better handle the increase in volatility, while stop-losses can help mitigate outsized losses.
Hedging can help too. We talked about hedging a few weeks ago, but the eToro Academy has provided info on this topic as well.
While it feels very doom-and-gloom right now, remember that the S&P 500 is only down about 5% from its record highs — something it does, on average, three times a year. Further, 9 of the 11 S&P 500 sectors are higher on the year still, meaning that there have been opportunities.
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The setup — Amazon
Amazon was a top performer before this latest correction, recently hitting a high near $242.50. If shares continue to pull back today or this week, technical investors will be keeping a close eye on the $195 to $200 area.
That’s where AMZN finds its 200-day moving average and a key level of previous resistance. The hope is that shares find support in this area if it’s tested.
If support holds, buyers will look for a potential return of bullish momentum to take AMZN higher. If support fails, bears will look for more momentum on the downside.
Options
Buying calls or call spreads may be one way to take advantage of a pullback. For call buyers, it may be advantageous to have adequate time until the option’s expiration.
For those that aren’t feeling so bullish or who are looking for a deeper pullback, puts or put spreads could be one way to take advantage.
Remember the environment, though. Implied volatility or “IV” is a component to options pricing. The higher the IV, the more expensive options become. When volatility is lower, the IV is lower as well and options pricing becomes a bit cheaper. We’re in a high-vol environment, so options pricing will be more expensive.
To learn more about options, consider visiting the eToro Academy.
What Wall Street is watching
NVDA – Volatility continues in Nvidia, which fell more than 8% on Monday and hit its lowest level since mid-September. It’s been a bumpy ride for Nvidia lately, which reported earnings just last week. Worries over increased chip-export restrictions from Washington are not helping matters.
XLV – Up more than 8% so far this year, the healthcare sector continues to perform well in 2025. A common ETF for this group is the XLV ETF, and its largest holdings include Eli Lilly, UnitedHealth, Johnson & Johnson, AbbVie, and Abbott Labs.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.