Tech stocks have been rockin’ the house of late. The Nasdaq even rallied to a new all-time high yet again yesterday. But have you noticed which high-profile stock has been noticeably absent from the party? One that once led the charge, but is now riding the pine? How about Amazon.com, Inc. (NASDAQ:AMZN)? And Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) for that matter.
The pair has been sleeping, but I can hear the alarm clock a ringin’, and I think AMZN stock, in particular, is about to wake up.
What spelled the top for Amazon shares was the massive “buy the rumor, sell the news” phenomenon that gripped the stock around the mid-July earnings announcement. The stock scored a rousing up gap that was rapidly rejected. By day’s end, AMZN sported an outsized bearish candle and it has been floundering ever since.
The stumble has taken Amazon beneath its 50-day moving average which is now flat, suggesting the intermediate trend has officially turned neutral. But we’ve seen some constructive price action finally crop up in recent weeks and with the fourth quarter looming, I think the king of retail is due to play some catch-up. Let’s look at two recent bullish developments.
First, the short-term trend is shifting from bearish to bullish. So says the higher pivot low that halted its last downturn. On top of that we’re now basing near resistance showing consistent buying pressure. A break over the 50-day moving average ($987) is the trigger I’m waiting for to deploy bullish trades.
Second, distribution days have dried up. Unlike the post-earnings drop that was littered with high-volume down days, the past few weeks have seen aggressive sellers depart. And that should bode well for the stock in the days ahead.
Shop for AMZN Stock Profits
The higher price tag of Amazon shares makes long call trades untenable for most traders. There’s simply too much risk if the stock sours. So let’s do a call spread instead.
Buy the Oct $990/$1,000 bull call spread for around $4.50. As usual with debit spreads, the risk is capped at the initial investment and will be lost if AMZN remains below $990. The reward is limited to the spread width minus the initial debit, or $5.50 and will be captured if the stock rises above $1,000.
In timing the entry, I suggesting waiting for a break above $987 to confirm the stock is finally waking up.
As of this writing, Tyler Craig held bullish positions in TSLA. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.