To The Moon

$Amazon.com(AMZN)$ have been looking good last week as they have pulled off a lot from the tops. So this week, I am looking to play some options on Amazon as the potential knee-jerk reaction from the U.S. debt ratings downgrade.

Amazon Valuation Manageable And Improving Free Cash Flow

Any index consolidation could give some very nice discount for Amazon. Right now, Amazon valuation is still manageable at around 205, and Amazon just had their earnings few weeks ago. Currently we are seeing a 26.5% undervalued, so at this current price around 205, it looks like a good discount.

If we looked into the future prospects for Amazon, we are seeing good improving free cash flow, there is also improving net margins , and the EPS is looking to go higher exponentially, its revenue is also continued to go higher to $900 billion by 2028.

Pullback Possible Trigger Downturn To Possible Lower Support Around 190

If there is any index consolidation, we could be seeing Amazon going from its recent high to a higher low on the daily time frames, it could well trigger a downside to the lower end of support which can be seen to be around the 190 level.

For the weekly, we are looking at $200.50 and this is the area where we could anticipating for possible further pullback, and we could be looking at a 200 level, where this might be a good level since the bulls control the weekly pushing the stock higher.

Since the bulls control the weekly of the stock pushing higher after our assignment especially with a weekly cross of the MACD to the upside so take a look at Amazon it was my example in the early part of the rules introduction right

If you are an aggressive bull, then we can consider to go the 200 strike for about 1.05, which is still under the expected move or slightly by about 50 cents.

If we want to go more defensive on Amazon in case it drops on early session, which mean the markets pull back because of the debt ratings headline.

Then we could find Amazon down 1 to 2% that is best case scenario potentially, this premium is going to move one strike lower to the 197.5 or the 195.

Anything Under 200 Looks Like A Fair Game

So if we were to get around 197.5 or 195, and if Amazon were to drop by 3-4% on Monday or Tuesday, then this would be even better, as we could be getting lower, hence, if Amazon were to go all the way down to 190 strikes, then maybe writing some short puts on Amazon could be something I may consider.

Summary

Amazon at time of this writing is already down by more than 1.5%, so the knee jerk reaction might be kicking in, and I will be monitoring closely on how I would like to play this option.

Appreciate if you could share your thoughts in the comment section whether you think Amazon would experience a pull back and then make a recovery by Friday (23 May).

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.