I'm sure you've seen the news...
President Trump versus Amazon.com Inc. (Nasdaq: AMZN).
And now Amazon is in limbo - and waiting for stipulations to be placed by the U.S. government.
This coupled with the absurd volatility in the U.S. equity markets has not bode well for AMZN through the month of March - including a 6% drop in its share price.
But regardless of the political rhetoric surrounding the online retail giant - my Money Calendar is flashing some interesting numbers about the future of this stock and is even suggesting a potential profit opportunity...
A Battle for the Ages: President Trump vs. Amazon
This isn't the first time Trump has voiced his distaste for Amazon and their business practices. Long before he took to the oval office, Trump was sharing his opinion on the e-commerce giant.
But most recently, the president took to Twitter to express his concerns.
The president argued the Amazon has an unfair advantage over most traditional retailers in the way the business handles sales tax on purchases.
Last year, Amazon started collecting a sales tax on products it sells directly to consumers in states that levy them. But, the further concern for some of the competition is the unfair advantage they see Amazon as having in regard to the policy for third-party vendors.
And while the president is calling for a price hike from the United States Postal Service - the likely outcome is that there won't be much of an increase to Amazon's shipping rates, at least not right away - and it won't come from Congress.
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The U.S. Postal Service sets the rates for Amazon - and the company is one of their biggest customers. The looming fear of Amazon creating its own internal delivery system, or using a combination of smaller delivery services, sits in the back of its mind.
And while the president's efforts may have been to throw Amazon into hot water - from an investor standpoint, the president may have created the perfect buying opportunity.
So What Does This Mean for Investors?
From my point of view, it's as if investors in AMZN wanted to lighten their stock load until they have a better sense of what's happening with the company.
Right now, it seems a lot is up in the air for the retail giant - but in reality, it boils down to three main reasons to why investors are taking profits and pulling back on holdings...
- The new tax policy on delivered goods
- The president's announcement that the U.S. Postal Service should negotiate higher prices
- Unsubstantiated claims that Amazon is costing America money and jobs
But it doesn't appear that this selling was done in enough of a widespread panic mode, because Amazon stock simply pulled back to its previous price point.
As you can see below, this reversal that happened last Wednesday could become a double-bottom price support at $1,350.
Another technical view is that the stock at $1,350 is at a key Fibonacci retracement level, the 38.2% level, which many technical traders of stock or options like to use as support. Fibonacci retracements are ratios that are used to spot potential pullbacks or corrections. This can be used to predict when and for how long a pullback will happen in the markets.
What the stock needs to see now is what's called "follow-through days." In this case, AMZN has been in a downdraft, and last Wednesday's bullish reversal day happened, but we need to see another day (or more) where the stock keeps moving higher. And if it can do so on increasing volume, all the better.
Here's How to Grab a Possible Profit on This Retail Giant
Now, Amazon is slated to release earnings on May 3 after market close. With that said, there are a couple ways you could play this...
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If you're an aggressive options trader considering a long call option play, a good idea would be to only use this strategy if you plan on closing the position prior to the earnings report.
I could see a technical price move to refill the gap down at $1,500 all the while monitoring this $1,350 price level as support - that if broken to the downside would be a stop point to strongly consider.
But regardless, I would close any position - no matter the profit or loss - prior to the earnings announcement.
Now, we all know Amazon is expensive regardless of how you buy...
But one way to hedge the cost of a straight long call is to create a "call debit spread," or as we call it here at Power Profit Trades, a bullish (green) loophole trade.
The last options strategy that you could consider is the "straddle." The key is to wait closer to earnings before executing this strategy. You'll want to keep a close eye on the stock's current price and the price of the put to gauge where the stock could go next.
Specifically, you want to see Amazon stock moving higher or lower more than the price of the options so that the real value (also called "intrinsic value") of the call or put exceeds the price you paid for the straddle. That way, you get to pocket the profits.
And that's it.
I'll be keeping a close eye on this company as it gets closer to earnings - so, for now, ignore the talking heads and stick to your strategies to decide if AMZN is the right move for you.
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The post Here's What President Trump's Opinion Means For Amazon appeared first on Power Profit Trades.
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.