Chart of the Day – Amazon (AMZN) After 1000

by Dan May 26, 2017 1:25 pm • Chart of the Day

I don’t have much of anything intelligent to add to the Amazon (AMZN) story. The stock’s 32% year to date gains ($150 billion in market cap terms) and 45% gains from its post-Brexit 52-week lows are truly astounding. When the stock appreciated more than 100% from its 2012 lows to hits early 2014 highs, the bull case was North American retail sales. When the stock doubled again in 2015 the bull case Amazon Web Services (AWS) at the time which accounted for 5% of their total sales (now about 10%). But this year, the bull case is merely an investor euphoria that the company can do no wrong and that it is only a matter of time before the stock sports a $1 trillion market cap, which would mean another doubling from here:


It’s not just investors, but Wall Street analysts are downright giddy on the stock with 39 Buy ratings, only 7 Holds, and NO Sells with an average 12-month price target of $1100, moe than 10% from current levels.

There is obviously no overhead resistance in the stock, but there is clearly some levels to keep an eye on if one could get their head around looking down. $950 could serve as an important near-term support level, with mild support at $900 and massive support at the prior breakout level to new highs at $850:


Long holders who are happy to hold onto the stock, but are willing to give up some upside for some downside protection might consider an options overlay strategy called a cashless collar where an investor sells an out of the money call (against long stock) and uses the call premium to buy an out of the money put of equal premium.

For instance, vs 100 shares of AMZN at $992, one could Buy the Aug 950 / 1045 Collar for Even Money

-Sell 1 Aug 1045 call at $26

-Buy 1 Aug 950 put for $26

Break-Even on Aug Expiration:

Profits: of stock up to 1050, up nearly 6%

Losses of stock down to 950, down 4%, protection below $950

Rationale: If the stock keeps going higher above 1000 this will have mark to market losses but not on a very large delta. Above 1045 the stock is called away but there’s time to adjust of the stock goes higher after 1000. The big thing here is if the stock finds sellers at 1000 a quick pullback could occur. This overlay essentially locks in profits just $50 lower in case the selling gets more serious.