Trading Strategies For Amazon Stock Heading Into Q2 Earnings

Amazon.com, Inc AMZN is set to print second-quarter financial results after the market close Thursday. The stock was trading slightly higher heading into the event.

When the e-commerce and streaming giant printed its first-quarter results on April 27, the stock closed the following trading day down almost 4% and fell an additional 3.22% on May 1.

For the first quarter, Amazon reported earnings of 35 cents per share on revenue of $127.4 billion. The company beat the consensus EPS estimate of 21 cents on the $124.53-billion revenue estimate.

For the second quarter, analysts expect Amazon to report EPS of 34 cents on revenues of $131.54 billion.

On July 31, Credit Suisse analyst Stephen Ju maintained an Outperform rating on Amazon and cut the price target from $142 to $176. Read more here…

From a technical analysis standpoint, Amazon's stock looks bullish heading into the event, holding support above the 50-day simple moving average (SMA) and possibly negating a downtrend. 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: Amazon fell lower temporarily on Thursday before popping up to trade within Wednesday's range. If Amazon receives a bullish reaction to its earnings, Thursday's low-of-day will serve as a higher low, which would negate the downtrend the stock fell into on July 17.

If Amazon suffers a bearish reaction to its earnings print and loses support at the 50-day SMA, the stock could continue trending downward toward the 200-day SMA, which would confirm the downtrend remains intact.
If Amazon surges above $134, a new uptrend will be confirmed and the stock could be headed toward 52-week highs.
If Amazon falls on Friday, especially if it’s in unison with Apple, volatility in the stock market is likely to increase. Traders wishing to play the potential volatility in the stock market can use MIAX's SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index SPIKE, track expected volatility in the SPY over the next 30 days.
Amazon has resistance above at $131 and at $136.83 and support below at $125.93 and at $117.16.