The stock markets are at all-time highs yet Amazon (NASDAQ:AMZN) is 13% off its own peaks. Regardless of its recent performance, it is one of the strongest performers of the last decade, if not one of the strongest stocks of all time. But along the way to its success, naysayers have been aplenty. And therein lies today’s opportunity.
This is a company that is the absolute picture-perfect example of a growth success story. And it has never stopped growing since its inception.
In the last five years, the S&P 500 is up 50% while Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Facebook (NASDAQ:FB) are up 120%, 138% and 157%, respectively. Amazon’s stock is up 435% for the same period. So clearly, the critics continue to be wrong.
In spite of the evidence, the media’s rhetoric remains antagonistic. The fact that so many perceive AMZN negatively, despite its past performance, is puzzling. But this also offers a trading opportunity. While critics hate on it, Amazon stock is consolidating to grow a solid base. And the shorts are getting comfortable in their positions against it. Then, as it always does, Amazon will break out to ruin bearish bets.
Critics Fear Amazon’s Top Asset
Critics recently hated the AMZN earnings report. They mistakenly pointed out weaknesses due to high spending. On the contrary, spending too much is what brought Amazon its past successes. This spending is the very asset that made it the dominant beast that it is today. The astonishing part is that Amazon dominated in several different verticals.
There is no doubt that under the leadership of Jeff Bezos, Amazon’s management team has earned the benefit of the doubt. Yet the so-called smart money is still trying to short it. The easy trade in Amazon stock over the long term is to not bet against it. This is a company that doubled its revenues in under five years while its stock quadrupled.
Yet, some experts still see fault in these amazing statistics. Once the breakout happens, there will be panic in trying to cover their short positions. Then buying will beget more buying. That is how the stock spiked over $1,000 as it doubled from its October 2017 price. This happened after the same critics saw fault in the July 2017 earnings report.
The odds suggest that Amazon stock will move higher as long as the U.S. equity markets are higher. Management has yet to disappoint Wall Street on a consistent basis. Every dip has been a buying opportunity. So this swoon in the Amazon stock price is most likely going to be an entry opportunity for the long term.
Alternatively, the options markets offer opportunities that don’t need rallies to profit. Selling puts into what others fear is the perfect application of today’s thesis. For example, I can sell the AMZN January $1,550 put and collect $6 for my risk. I am a winner as long as the stock stays above my strike through mid-January. Otherwise, I own shares 13% cheaper than the current price. I don’t start losing money until the stock hits $1,544 or lower.