$AMZN - Be Patient, big move is coming
Updated
If you are thinking of trading Amazon, the best move right now is to probably not trade Amazon :D
Underlying Stock
What I see-
Here's a scenario from recent history that looks similar to me in regards to price and the Bollinger Band squeezing-
And here's out current one without any drawings for context-
The big thing here is that we are getting ready for a squeeze and a big move. Be it the triangle narrowing down, or the Bollinger band width getting very tight, this range has to break sooner or later.
Options
The way I want to play AMZN is to patiently wait for about the $3000 price and either long shares or long calls while the IV is cheap. Set the limits on buying low and let price come to you.
To really micromanage the options I would either buy short-termed calls at the bottom and try to write short-termed calls against them after a day or two of movement up, or buy something like the 02/19/2021 expiration, $3200 strike, and write the $3200 call on an expiration 2ish weeks out, then keep rolling that option out.
(Rollouts are fragile things.. on one hand the closer towards expiration, your short option will plummet in price which is nice, but the amount of juice left to squeeze gets exponentially smaller and your long option's decay starts to outweigh this. Think a $20 option losing 75% of its price in a day-- $15, wow that's nice, but if your $200 option loses 10% of its price in a day, that's $20 lost, for a net loss on the day of $5.)
I'm not a professional financial advisor by any means. The more I learn about stocks and especially options, the more I understand I do not know a lot. I am sure there are people out there who could comment on a number of things said, especially in regards to my options ideas, so please make your trades based on your own research and levels of risk.
Underlying Stock
What I see-
- BULLISH: a nice Head and Shoulders that appeared to FAIL last week, with enough support to stop it from even testing the neckline.
- BULLISH: a Symmetrical Triangle with price coming from below, which means this is more or less consolidation before a breakout UP
- NERVOUSLY BULLISH: Still -barely- above the lower band of the Bollinger Band. I've noticed that that AMZN more often than not rides the SMA20 on Weekly before pushing off. If the band width was larger and it crashed through the upper band it would have more conviction to make a move down. In this case it seems like a sideways break before continuation.
Here's a scenario from recent history that looks similar to me in regards to price and the Bollinger Band squeezing-
And here's out current one without any drawings for context-
The big thing here is that we are getting ready for a squeeze and a big move. Be it the triangle narrowing down, or the Bollinger band width getting very tight, this range has to break sooner or later.
Options
- The Implied Volatility (IV) on AMZN options is not very good for selling premiums at this point. Market Chameleon puts the IV30 rank at 47%, which is low and actually resting just below the HV 252 MA
- In other words, options volume (and underlying price) is coiled up like a spring
- If you look at the maturity and structure of AMZN IV, it's very much in Contango, basically waiting for the next quarterly earnings report (at the end of January/start of Feb), or some other event
The way I want to play AMZN is to patiently wait for about the $3000 price and either long shares or long calls while the IV is cheap. Set the limits on buying low and let price come to you.
To really micromanage the options I would either buy short-termed calls at the bottom and try to write short-termed calls against them after a day or two of movement up, or buy something like the 02/19/2021 expiration, $3200 strike, and write the $3200 call on an expiration 2ish weeks out, then keep rolling that option out.
(Rollouts are fragile things.. on one hand the closer towards expiration, your short option will plummet in price which is nice, but the amount of juice left to squeeze gets exponentially smaller and your long option's decay starts to outweigh this. Think a $20 option losing 75% of its price in a day-- $15, wow that's nice, but if your $200 option loses 10% of its price in a day, that's $20 lost, for a net loss on the day of $5.)
I'm not a professional financial advisor by any means. The more I learn about stocks and especially options, the more I understand I do not know a lot. I am sure there are people out there who could comment on a number of things said, especially in regards to my options ideas, so please make your trades based on your own research and levels of risk.
Note
For anyone still following, the triangle is nearing a close. I am seeing other retail stocks correlating with AMZN (such as COST, WMT, KR, OLLI) looking like they are bottoming today. On a related note I think the Nasdaq 100 (QQQ) is about to really breakaway and melt up, likely carrying AMZN with it.Here's what AMZN's 30 day Implied Volatility looks like currently-
We are looking at squeeze action happening this week. These often get fakeouts- might move sharply down, only to get bought up and the final move being way up, or vise-versa. My hopes to catch AMZN at $3000 are mostly gone, 11/23 was the last opportunity for those lows. Keep an eye on AMZN tomorrow and rest of week, to me a move underneath $3100 is where you want to to be ready to buy a fakeout and have eyes set on profit targets of $3300, $3400, $3500, and beyond.
You can buy Long Calls, Diagonal Calls, etc if you are bullish on direction, or the rare opportunity for Long Straddles/Debit Iron Butterfly, Debit Iron Condors if you are directional averse-- the IV is still low enough and looking to burst, so what you would hope to have happen is maybe price goes way up and your Calls gain 50%, but your Puts might not drop very much thanks to their IV ratcheting up as well (potentially even being profitable as well).
Good luck!
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