Amazon, everyone’s market darling has once again had a blowout quarter and reported fantastic earnings. We’re talking revenue of $51.04 billion vs. $49.78 billion estimate and the big one – EPS of $3.27 per share vs an estimated $1.26.

Some of the numbers truly are staggering, including a 43% year-over-year increase in revenue and a 139% increase in advertising revenue.

Nobody wants to bet against this stock and for good reason.

Did you know, the last time AMZN touched its 200 day moving average was back in Feb 2016 when the stock was trading at around $550. Hard to believe really.

When Amazon peaked in November 2015 it was trading at $676, then dropped 30% to $474.

It came close to touching the 200 in November of 2016 and again in September of 2017. During those drops, the stock fell 16% and 13%.

Looking at the chart above, Amazon is significantly above the trendline from the 2016 bottom and is showing negative divergence.

I’ve said this numerous to my mentoring students. Stocks ALWAYS come back to the 200 day moving average eventually. It could happen in the next few months, it could take 6-12 months. It could happen with a short sharp 25% decline, or it could involve months of sideways action which the 200 catches up with price. But mark my words, at some point AMZN will touch the 200-day line again.

I said the same thing about Alibaba back in late 2017 at a time when no one was willing to bet against the stock. Since then BABA has traded sideways with quite a few big up and down moves, but sure enough, it eventually touched the 200.

Amazon’s fundamental story is very strong but to me, the technicals look concerning. It anyone’s guess which will win, but the beauty of options is that they allow you to express an opinion in a variety of different ways. It would take a brave man to bet against Amazon, but we could take a punt with a small amount of capital by using an out-of-the-money put butterfly.

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