Shares of the ProShares Online Retail ETF (NYSEArca: ONLN) rallied Monday in unison with Amazon.com (NASDAQ: AMZN) stock as the largest e-commerce company reported record-setting holiday sales.

ONLN seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index. The index tracks retailers that principally sell online or through other non-store channels. The index uses a modified market-capitalization weighted approach, is rebalanced monthly and is reconstituted annually. Retailers may include U.S. and non-U.S. companies.

To be eligible, retailers must: be classified as an online retailer, an e-commerce retailer, or an internet or direct marketing retailer, according to standard industry classification systems; have a market capitalization of at least $500 million; have a six-month daily average value traded of at least $1 million, and meet other requirements.

On Monday, “Amazon.com Inc.’s stock had the biggest advance on the S&P 500 Index after the e-commerce giant said its holiday season this year was ‘record-breaking,’ with billions of items shipped and ‘tens of millions’ of Amazon devices like the Echo Dot sold,” reports Bloomberg.

Amazon is pivotal to ONLN’s fortunes because, as of the end of the third quarter, the ETF allocated 24% of its weight to the e-commerce giant, good for one of the largest Amazon allocations among all US-traded ETFs.

Amazon Angles

The outlooks for Amazon and ONLN are bullish beyond this holiday season.

“Next year, global online sales are projected to surpass $4 trillion—a 41% rise from 2018,” ProShares said. “More than two billion people are expected to be digital buyers in 2020, a 14.5% increase from 2018. In two years’ time, annual online purchases are projected to reach 18.1% of total global retail sales.”

Amazon’s charts indicate more upside could be on the way for stock and that could be a significant boost to ONLN.

“AMZN has added 21% in 2019, and earlier this month toppled the resistance at its 80-day moving average. Now a leg of support for the shares, this trendline, combined with impressive holiday gains, could have the equity breaking above its $1,850 mark for the first time since late July,” notes Schaeffer’s Investment Research.

With the help of Amazon’s Monday rally, ONLN extended its December gain to nearly 7%.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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