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Amazon.com, Inc. (AMZN) Stock Is Going to $800 on Best Holiday Ever

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Amazon.com, Inc. (NASDAQ: AMZN ) is about to catch a real Santa Claus rally.

In what AMZN is calling its best holiday season ever , Amazon said it shipped more than 1 billion items worldwide this shopping season. What's more, Amazon's own products were among the hottest items, with the Amazon Echo home assistant and the Echo Dot topping the best-seller lists. This all adds up to a bullish outlook for AMZN stock.

Amazon Charts and Sentiment

Click to Enlarge Technically, Amazon stock has been in a bit of a holding pattern since the beginning of December. The shares have bounced along support in the $760 area, with resistance at AMZN's 50-day moving average running interference on any rally attempts.

The shares are currently in the process of bouncing off this area, and have reclaimed their 10- and 20-day trendlines in the process. The added momentum from Amazon's holiday sales report could be just the spark AMZN stock needs to finally topple its 50-day trendline.

On the sentiment front, AMZN stock a favorite within the brokerage community. Thomson/First Call data reveals that all but five of the 46 analysts following Amazon stock rate the shares a "buy" or better. Furthermore, the 12-month consensus price target of $929 represents a healthy premium of about 20% to yesterday's close.

Options traders, however, are lagging in the bullish sentiment department. While this may be due to AMZN premiums being rather lofty - resulting in a wealth of bullish-to-neutral put selling activity - the January 2017 put/call open interest ratio for AMZN stock still rests at an elevated reading of 1.05. That said, this ratio has come down a bit in recent weeks; a continuation of this trend could have bullish implications for Amazon stock.

Overall, January 2017 option implieds are pricing in a potential move of about 4.26% through expiration on Jan. 20. This places the upper bound at $802.78 and the lower bound at $737.22.

While a short-term move north of Amazon's 50-day would be bullish, a breakout above $800 would be a huge win for AMZN bulls. That said, a dip to $750 could be seen as a buying opportunity, but a decline to the $737 region may bring more sellers to the table.

2 Trades for AMZN Stock

Call Spread: Those traders looking to side with the brokerage community might want to consider a Jan 2017 $780/$800 bull call spread. At last check, this spread was offered at $6.76, or $676 per pair of contracts. Breakeven lies at $786.76, while a maximum profit of $13.24, or $1,324 per pair of contracts, is possible if AMZN stock closes at or above $800 when January options expire.

Put Sell: On the other hand, if Amazon's premiums are a bit too high for your taste, or if you aren't convinced that the rally has legs, then a Jan 2017 $740 put sell may be more your speed. At last check, this put was bid at $5.51, or $515 per contract.

As with all put sells, traders will keep the premium received for entering the trade as long as AMZN trades above $740 through September expiration. If Amazon were to trade below $740 prior to expiration, then you could be assigned 100 shares of AMZN stock per contract sold at a cost of $740 per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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