Amazon: Reminding me of Tesla just before TSLA's news on the S&P
Republishing this idea as the original was removed last week due to a mistake I made breaching house rules
One of my best trades this year was buying Tesla calls just before they announced its inclusion in the S&P (you could find that post at the bottom of these notes).
Amazon's price action throughout December is telling me there will be a catalyst that'll drive a dramatic price spike soon - I think January. Maybe a split in the stock? There was a lot of selling pressure in Amazon in the last few weeks because funds had to sell it to include TSLA in the S&P . That overhang is no longer there. December is seasonally one of its weakest months, while January has an average return of 3.5% over the past 20 years, and +9.68% since 2015 (See seasonal performance below). Additionally, Q4 2020 will be the biggest quarter in Amazon's history... but since I'm a chart guy let's focus on some chart clues.
1) As we see in the post above, AMZN is coiling tightly in a symmetrical triangle (difficult pattern to trade on breakouts as they could often fake out from historical supply).
2) It's sitting right above the 50d and the 21d moving averages:
3) When I look at how Amazon looks compared to other FAANG stocks, I see room for relative outperformance.
Amazon vs Microsoft:
Amazon vs FB (Monthly):
Amazon vs Facebook (Daily):
Amazon vs Netflix:
The one stock among FAANG that may defend its leadership in the coming months could be Apple , but you'll still see enough support coming in soon (in blue):
Last, look at how important the 3250 - 3260 pivot is. I blocked out the two price spikes to give you a better visual:
I am long Amazon calls (Jan and Feb) and will monitor spots to add into. I think I might be a bit too early, and a deeper shakeout could be needed before it goes. But I'll be ready.
Seasonal Performance History 2015 - 2020:
Jan 2020: +8.71%
Jan 19': +14.43%
Jan 18': +24.06%
Jan 17': +9.82%
Jan 16': -13.15%
Jan 15': +14.24%
--
Dec 15': +1.67%
Dec 16': -.09%
Dec 17': -.62%
Dec 18': -11.13%
Dec 19': +2.61%
Dec 20: +1.21% (so far)
---
Tesla Analysis before its S&P announcement:
One of my best trades this year was buying Tesla calls just before they announced its inclusion in the S&P (you could find that post at the bottom of these notes).
Amazon's price action throughout December is telling me there will be a catalyst that'll drive a dramatic price spike soon - I think January. Maybe a split in the stock? There was a lot of selling pressure in Amazon in the last few weeks because funds had to sell it to include TSLA in the S&P . That overhang is no longer there. December is seasonally one of its weakest months, while January has an average return of 3.5% over the past 20 years, and +9.68% since 2015 (See seasonal performance below). Additionally, Q4 2020 will be the biggest quarter in Amazon's history... but since I'm a chart guy let's focus on some chart clues.
1) As we see in the post above, AMZN is coiling tightly in a symmetrical triangle (difficult pattern to trade on breakouts as they could often fake out from historical supply).
2) It's sitting right above the 50d and the 21d moving averages:
3) When I look at how Amazon looks compared to other FAANG stocks, I see room for relative outperformance.
Amazon vs Microsoft:
Amazon vs FB (Monthly):
Amazon vs Facebook (Daily):
Amazon vs Netflix:
The one stock among FAANG that may defend its leadership in the coming months could be Apple , but you'll still see enough support coming in soon (in blue):
Last, look at how important the 3250 - 3260 pivot is. I blocked out the two price spikes to give you a better visual:
I am long Amazon calls (Jan and Feb) and will monitor spots to add into. I think I might be a bit too early, and a deeper shakeout could be needed before it goes. But I'll be ready.
Seasonal Performance History 2015 - 2020:
Jan 2020: +8.71%
Jan 19': +14.43%
Jan 18': +24.06%
Jan 17': +9.82%
Jan 16': -13.15%
Jan 15': +14.24%
--
Dec 15': +1.67%
Dec 16': -.09%
Dec 17': -.62%
Dec 18': -11.13%
Dec 19': +2.61%
Dec 20: +1.21% (so far)
---
Tesla Analysis before its S&P announcement:
Note
Today's price action is VERY significant. Price has broken above a major level (3250 - 3260::Note
fjpereny in the comment section made a good mention that this is a VCP. This is correct. For those that don't know, a VCP is a volatility contraction pattern. Notice how each impulse has lower and lower volatility. It tightens up/coils inside the pattern (Tesla did this before the S&P announcement as well). This coiling creates energy in the asset. You could learn more about VCPs in Mark Minervini's books. I highly recommend them.
Note
Remember how important 3250s were for Amazon. Resistance turns support:Trade closed: stop reached
I got stopped out on all my AMZN calls just above breakeven (spot price was 3235 at the time of selling). This is the worst popcorn trade I've had in a long time (big profit -> to losing majority of it). If AMZN options were smaller size then I would layer it better, but they're too large for me to have multiple contracts to trim well with them. I am now waiting to see how price plays out at the 3190 level - very big spot.Note
Something I want to mention as price inches its way to the bottom trendline I initially drew. That trend line should NOT be used as major support. Trend lines are NOT sacred. Charts morph and form new patterns that make former trendline support become less relevant. This is why horizontal support and resistance levels are a LOT more significant/reliable than trendlines. After price broke back below 3250 it was all I needed to know to get out of the way.
Right now I'm monitoring to see where the selling really gets exhausted... we still have no evidence of this yet. The price action in the last week is telling... Big tech is out of favor for now, so watch those clues. It's not just Amazon.
Next support is around 3075 if 3135 breaks (looks like it will to me):
Trade active
I am back long. I own Feb 19 3600 & 4000s and March 4000s calls
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.