Let’s look at some pivot points for Amazon (AMZN). (July 27, 2017)
AMZN
Amazon ( NASDAQ:AMZN ) reported earnings after the bell and you can see where the stock is, clear down here. I am not going to get into what happened today during the day. If you didn’t know better you would almost think that this is what happened when Amazon ( NASDAQ:AMZN ) reported earnings, it gapped up and then reversed. But of course that is not the case. The entire market kind of sold off, mostly tech and transports but there was kind of a general weakness.
Here is the thing: What do we do with Amazon ( NASDAQ:AMZN ) tomorrow morning? You can calculate tomorrow’s pivot points today. You don’t need any fancy deal, just go to <pivotpointcalculator.com>, type in the figures that they ask for and you can do that. Not a big deal. If we look at what is happening here tomorrow, this is the first level of support, it is called S1. Right now the stock is below that level. Lets look and see here, this would be the first level of support tomorrow. The second level of support is clear down here where the stock actually penetrated through that, after the close of course, and now it is moving higher.
Here is what you want to look for; there is absolutely no way you want to be selling Amazon ( NASDAQ:AMZN ) at the open. One of the more common mistakes that people make, particularly on the short side is, they think they are going to get a head start by doing it first thing in the morning. From a percentage standpoint, it is not really an extreme move, it is down a little over 2 percent. It seems like a lot because it is $22.00, but the stock is over $1000.00, 2 percent is not that big a deal. This is not one of those gaps that is going to just quickly snap back. Nor is it one that you can just look at and say, “Well this is just going to keep on going down to zero.” It is not going to do that.
What I think the trade here on this is, is to trade calls or puts tomorrow; trade options on this. I would not be buying calls just because that is kind of a low probability thing. Sometimes you make money, a lot of times you don’t. If you are the guy that makes money all the time on buying calls you are probably one of the bigger liars that you know. It is kind of a low probability thing. As long as the stock stays above 1013.00, which would be the second level of support tomorrow, I would sell some out of the money puts. Maybe sell the $1000.00 puts; this is where the stock tagged actually after hours. I really, really doubt the stock is going to come down here again. There are so many stocks that went from overbought to oversold in a day. What I am talking about is, tomorrow I think we will see a snapback in some of these names. I have no idea how far this would go,
The way it is looking right now I think it could easily come back to 1030.00, which, on a percentage basis, is not that big a deal. If you are selling the August puts, out of the money puts, and you can cover that up by buying a lower strike, the 990.00s or something like that. My bet is you are going to make some pretty good money just in the next day or two. It would be a short-term trade, but the point is, if you look at Amazon ( NASDAQ:AMZN ), the way it is traded here, lets see what the weekly chart looks like, this uptrend is still intact (I am leaving these line here because it will help me tomorrow), but the uptrend is intact. All this has really done is retraced the breakout; this was where the stock broke out after trading sideways for a month and a half or so. Finally got a nice break, little bit heavier than average volume, all we have done is come back to test this. It is not a perfect buy point. What you want to see in things like that are more of a sideways drift as opposed to a straight shot down.
But I think the path of least resistance, first thing in the morning, is going to be for this stock to rebound. Sell some puts against it. Make sure you cover you asterisk. What I mean by that is, make sure you know how much money you are risking. You don’t want to sit here, catch a falling knife, see the stock continue to move down and then wonder, “Well when is Dan Fitzpatrick’s prognostication going to come true?” We have got to look at the risk we are taking and make sure the direction we are in is in the right direction for the stock.
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