4 Trades to Fly Higher with Amazon: Bonus Idea
- Posted by Greg Harmon
- on January 9th, 2017
Here is your Bonus Idea with links to the full Top Ten:
Amazon, $AMZN, moved higher out of consolidation in March, rising $150 before consolidating again. The second consolidation lasted 2 months and was followed by another run higher of nearly $150 ending in October. This move was not followed immediately by consolidation though. Instead the stock pulled back to the prior consolidation range and just above its 200 day SMA. From there it started a consolidation in a symmetrical triangle. Friday saw the price break the triangle to the upside, giving a target to 862, which would be a new all-time high.
It is significant that the price remains over its 200 day SMA, the bull/bear line. It also has a RSI that pushed up into the bullish zone and has support from a MACD that is crossed up, positive and rising. The Bollinger Bands® had squeezed before the break out and are now opening to allow the move. There is resistance at 800 and gap to fill to 815 then resistance at 845. Support lower comes at 780 and 750. Short interest is low at 1.6%. The company is expected to report earnings next after the close on January 26th.
Options chains for regular January Expiry show the largest concentration of open interest at the 800 strike, and the at-the-money straddle suggests a nearly $24 move by then. Looking at the January 27th Expiry chain there is much lower open interest with most below the current price. This contract has only been open a few weeks though. The ATM straddle here suggest traders are looking for a $38 move. The February monthly options show good size at 800 and then again at both the 750 Put and 850 Call strikes. The April chain shows big open interest at 800 and 850.
Amazon, Ticker: $AMZN
Trade Idea 1: Buy the stock with a stop at 780.
Trade Idea 2: Buy the stock adding a January 27 Expiry 795/755 Put Spread ($13.80) and selling a February 850 Covered Call ($11.65 credit).
Trade Idea 3: Buy the February 800/850/875 Broken Wing Call Butterfly ($14.45).
Trade Idea 4: January 800/820 Call Spread ($6.70) and sell the January 780 Put ($5.60 credit).
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After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which heading into the first full week of 2017 sees the equity index ETF’s looking strong, as if they had a restful holiday break.
Elsewhere look for Gold to continue the bounce in its downtrend while Crude Oil continues higher. The US Dollar Index may continue to digest its break out while US Treasuries continue their bounce in the downtrend. The Shanghai Composite is resuming its uptrend and Emerging Markets are biased to continue higher short term as well.
Volatility looks to remain at abnormally low levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts all look great for more upside on the longer timeframe. On the shorter time frame the QQQ looks to be the leader moving higher while the SPY is not far behind and the IWM consolidates. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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