Amazon (NASDAQ:AMZN) shares have a long and consistent history of rewarding breakout buyers. It’s a trait that all of the best trending stocks carry. Once resistance defenders are finally felled, bulls are quick to scale the ramparts and power forward. We’re witnessing such a phenomenon play out today. Amazon stock just cleared resistance and is tagging a new record as I type.
AMZN stock kicked off 2018 with a bang and it hasn’t looked back since. Year-to-date, the online retail king has added 66% to what was already a hefty market cap. Shareholders are basking in Benjamins with full faith and confidence in Jeff Bezos’ ability to continue delivering.
From a technical perspective, Amazon stock has been incredibly well behaved. Let’s begin with the weekly time frame.
The tagline for Amazon shares should be “gravity defiance.” Overbought readings have accompanied its rocketship rise for months on end. Indeed, it’s the poster child for a trend in motion remaining in motion. The ascending channel that began last October has operated like clockwork with nary a misstep. With the psychologically significant $2,000 level looming overhead, I think AMZN stock will continue melting higher to test it in the coming days.
We can see the history of breakouts by turning to the daily chart. Resistance zones have proven powerless in stopping Amazon’s rise. The moving averages are confirming the trend’s dominance with the 20-day and 50-day rising closely below like loyal puppies.
Monday’s pop in AMZN stock and today’s follow through confirm that resistance has once again given way. And that makes now as good a time as any for deploying bullish trades.
Amazon Stock Option Play
To control the cost of our trade, we can build a bull call spread. Buy the Oct $1,950 call and sell the Oct $1,970 call. The $20-wide vertical spread currently trades for $9.40. This sets you up to more than double your money if Amazon stock can rise above $1,970 in the next two months. The risk is $940, and the reward is $1,060.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
