Trade Ideas for AMZN into earnings tomorrow with stock options

Are you a bull or a bear?

Tomorrow Amazon reports earning after hours which is considered a catalyst for price action. It went below it’s 200 EMA (exponential moving average) today which is a bearish signal (but it’s up after hours tonight). Expected EPS is 3.10 and it’s exceeded it’s estimates the last 3 quarters. It doesn’t pay a dividend, but it’s one of my favorite growth stocks out there, and it’s trading pretty low: $1,688 at the time of publication. It maintains a 98% analyst BUY rating in Robinhood. My brokerage rates it a 6.1 of 10 or Neutral. Trading Central today said that over the short term, the downside prevails as long as 1856 is resistance (see diagram below). There were several well tested support lines it fell through recently that it now needs to break through tomorrow if it is to go back up.  Today is made a Bearish Engulfing candle (that’s as bad as it sounds, see last candle below). Since 2015, the last several times it came close to its’ 200 EMA it seems to have bounced. It’s RSI (relative strength indicator) is also very low which means it may be oversold and turn around in the not to distant future. If you subscribe to this theory then you might load up on a share if you have the spare cash ready. It’s Elliot Wave is showing a bearish sequence. It’s stocktwits sentiment dropped to 79% bearish today. To spend less on the trade since the stock is so expensive, you might look at the October 26 options in a vertical spread. They have an Implied Volatility of 60.6% which means it could go up or down by 120.89 points by Friday.  Or, maybe rather than playing the lotto, you could try buying an iron condor. In the example below you would get a credit of $970 for entering into the trade. You have a neutral assumption of the range 1630 – 1690.  If it ends in that range by November 9th, you could keep your entire premium. If it goes outside those bounds you have a max loss of $280. It has a very low probability of success, and I think the range is too narrow so I might tweak it in the morning and see how futures the Asian markets did overnight and how it trades in pre-market tomorrow. I’m sure there are better ways to design the trade, but I think it’s a neat concept that you can profit from a range, and can do it for less than the price of the stock itself. You’ll make more if you’re able to predict the direction, but that’s difficult! So what does all this mean? What should you do? My guess is that Amazon will report good earnings and go up. How much? Couldn’t say. This is not investment advice, just what I think.  I’m probably going to see how it trades during the day tomorrow and watch eagerly from the sidelines. I’ll follow some other traders on the brokerage I use (tastyworks) and see what they’re doing for ideas as well. Right now, until further notice, all my new “Mad Money investments” go into a 1.9% savings account or a money market fund while I watch the market do it’s thing. If I decide to take a new trade, I’ll write it up in the future.  

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