Trading Strategies For Amazon Stock Before And After Q3 Earnings

Amazon.com, Inc AMZN is set to print third-quarter financial results after the market close Thursday. The stock was falling about 1% heading into the event.

When the e-commerce and streaming giant printed a second-quarter earnings beat Aug. 3, the stock surged over 8% the following day

For the second quarter, Amazon reported earnings of 65 cents per share on revenue of $134.4 billion. The company beat the consensus EPS estimate of 34 cents and the $131.54-billion revenue estimate.

For the third quarter, analysts expect Amazon to report EPS of 58 cents on revenues of $141.44 billion.

On Oct. 24, Seaport Global analyst Aaron Kessler initiated a Buy rating on Amazon and announced a price target of $145.

Must Read: Amazon Q3 Earnings Preview: What Analysts Are Saying, NFL, NBA, AI, Other Key Items To Watch 

From a technical analysis standpoint, Amazon's stock looks bearish heading into the event, but is due for a short-term bounce. 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 is trading in a fairly steep downtrend, making a consistent series of lower highs and lower lows. The most recent lower high was formed on Tuesday at $128.80 and the most recent confirmed lower low was printed at the $123.98 mark on Monday.

• On Thursday, Amazon was working to print a possible doji candlestick, which could indicate the local bottom has occurred and the stock will bounce higher on Friday. If that happens, bullish traders want to see the stock rise up over $129, which would negate the downtrend.
• If Amazon suffers a bearish reaction to its earnings print and falls under the 200-day simple moving average (SMA), the longer-term bull cycle will be negated and selling is likely to accelerate. If Amazon trades under the 200-day SMA, the 50-day SMA will start to curl lower, which would be a warning sign for the bulls.
• Amazon has resistance above at $125.93 and at $131 and support below at $117.16 and at $109.30.

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Photo courtesy of Amazon.