Trading Strategies For Amazon Stock Before And After Q1 Earnings

Amazon.com, Inc AMZN is set to print first-quarter financial results after the market close Thursday. The stock is spiking up over 5% heading into the event after gapping up to start the trading day.

When the e-commerce and streaming giant printed its fourth-quarter results on Feb. 2, the stock gapped down over 6% the following day and closed the session a total of 8.43% lower. Amazon then plunged into a downtrend, losing over 14% to reach a $88.12 low on March 13 before reversing into an uptrend.

For the fourth quarter, Amazon reported earnings of 3 cents per share on revenue of $149.2 billion. The company missed the consensus EPS estimate of 17 cents but beat on the $145.45-billion revenue estimate.

For the first quarter, analysts expect Amazon to report EPS of 21 cents on revenues of $124.53 billion.

On Tuesday, Credit Suisse analyst Stephen Ju maintained an Outperform rating on Amazon and cut the price target from $150 to $140. 

From a technical analysis standpoint, Amazon’s stock looks bullish heading into the event, trading above the 200-day simple moving average (SMA) but in need of a pullback. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders, particularly those who are holding close dated calls or puts, take on extra risk because the institutions writing the options increase premiums to account for implied volatility.

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The Amazon Chart: When Amazon spiked higher on Thursday, the stock confirmed its uptrend was intact by popping up above the most recent higher high, which was formed on Monday at $109.23. After trading near the 200-day SMA for four trading days, Thursday’s price action allowed Amazon to regain the level as support, which suggests the stock is in a bull cycle.

• If Amazon receives a positive reaction to its earnings print and remains above that level, the 50-day SMA will eventually cross above the 200-day, which would cause a golden cross to confirm. If Amazon falls following the event, bullish traders want to see the stock form a reversal candlestick, such as a doji or hammer candlestick, above the 200-day, which could also provide a solid entry.
• Bearish traders want to see big bearish volume come in and drop Amazon back under the 200-day, which could put the stock in danger of falling under the $102.45 level to negate its uptrend. If that happens, bearish traders can watch for an eventual bounce up into a lower high.
• Amazon has resistance above at $117.16 and $125.93 and support below at $99.88 and $95.49.

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