Here is your Bonus Idea with links to the full Top Ten:
Amazon (NASDAQ:AMZN) has a storied history, and that makes sense for a company that has and still is redefining what a company can be. There have always been multi-billion dollar conglomerates, but who would have thought even 15 years ago that one could be a world leading retailer, a leader in cloud based services and prepping to launch rockets into space. This conglomerate is not like the one’s your parents invested in.
The chart of the stock price looks very good as well. After a big run higher into the end of 2015, it pulled back over 50%. It made a low in February and has proceeded higher since. There have been a couple of consolidation periods along the way, including the current one. But the trend is clearly higher.
There are two patterns that are in play in the chart. The first is an AB=CD pattern that goes all the way back to the beginning of 2015. The B to C leg is shown and this is the 54.3% pullback. This gives a target for the CD leg to 884 and a timeframe of around the beginning of 2017. The shorter term pattern is a flag pattern off of the March and April consolidation and into the current consolidation. A break over this range gives a target on a Measured Move to 860.
The momentum indicators are looking to support the upside. The RSI held in the bullish zone during its pullback and is rising again. The MACD has reset lower, but still positive, and is turning up towards a bullish cross. The Bollinger Bands® have squeezed in as well. This is often a precursor to a move. There is no resistance over 731.50, which would be the trigger to get long. Support lower may be found at 711.50 or 688. Short interest is low at 1.3% and the company will report earnings next on July 28th.
The options chains show much greater open interest on the call side this Holiday shortened week. The biggest stand outs are the 727.5 and 740 strikes. This could draw the price higher. In the July monthly chain there is big open interest below on the put side at 700, 690 and 685. On the call side it is big at 725 and 745 followed by 750, 760 and 765. The biggest at 745. The July 29 Expiry has been lightly traded but the at-the-money straddle suggests a $66.60 move by then.
Amazon
Trade Idea 1: Buy the stock on a move over 731.50 with stop at 710.
Trade Idea 2: Buy the stock on a move over 731.50 and add a July 29 Expiry 725/680 Put Spread($18) also selling an October 800 Covered Call ($20 credit).
Trade Idea 3: Buy the July 730/745/760 Call Butterfly ($3.50).
Trade Idea 4: Buy the July 730/745/760 Call Butterfly and sell the July 700 Put (30 cent credit).
Trade Idea 5: Buy the August 750/800 Call Spread ($16) and sell the July 29 Expiry 680 Put ($16 credit) for free.
Trade 1 is a straight stock buy. Trade 2 adds a collar for protection through earnings and lowering your basis by $2. Trade 3 looks shorter term for a drive to the big open interest at 745 in July and Trade 4 adds leverage with a possible entry at 700. Trade 5 looks for upside in the intermediate term with leverage in the short term to fund it.
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 holiday shortened week sees the equity markets showing some strength with a strong rebound.
Elsewhere look for gold to continue higher while crude oil consolidates with a bias lower. The US Dollar Index is also consolidating but with a bias higher while US Treasuries are set to continue higher. The Shanghai Composite looks to continue its bottoming process and Emerging Markets look to continue higher in consolidation.
Volatility has fallen back and looks to remain in the normal zone keeping the bias higher for the equity index ETFs SPY (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts all agree with this on the shorter timeframe, and the IWM on the longer timeframe, while the SPY and QQQ remain in consolidation longer term. Use this information as you prepare for the coming week and trad’em well.
Disclaimer: 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.