AMZN - Placing a Bet

I saw this yesterday. AMZN 0.00%↑ is currently in a 53% drawdown, a level not seen since the GFC (Great Financial Crisis)

Presented here is a weekly chart of AMZN 0.00%↑ . Among the annotations you’ll notice -

• Current price approaching COVID lows

• RSI divergence occurring since May of this year

• Fibonacci levels extending from the COVID lows to the July/November highs

• Price line drawn across to the December 2018 low

• A favorable risk reward setup

https://www.tradingview.com/x/kOoXAGoe/

There are many ways to tactically trade this setup, mostly dependent on ones own risk/reward tolerance, timeframe, and degree of comfort with derivatives (options).

Sitting just under $87 at the time of this writing, there are favorable risk/reward price points to make a play against. We can look to the COVID low near $81 as a “stop out” level, as a breach would open the doorway to the December ‘18 low of $65. We can play that against prior congestion and Fibonacci areas of interest in the $100-105 range. This provides a roughly 1.6x risk/reward play.

In this environment, I personally prefer put spreads and call spreads against those price points of interest. Should the primary trend exhibit signs of change, I would be more open to holding a stock position. The methods to capitalize on the setup are endless, but the key point is that the current levels have provided a favorable setup for placing a risk managed bet.