Is Amazon Poised to Head Higher?

With shares of Amazon (NASDAQ:AMZN) trading around $327, is AMZN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Amazon serves its customers through its retail websites and focuses on selection, price, and convenience. The company also manufactures and sells Kindle devices. Amazon offers programs that enable sellers to sell their products on the company’s websites, including the sellers’ own branded websites, and fulfill orders through them. Amazon also provides platforms that allow authors, musicians, filmmakers, app developers, and others to publish and sell content. Online commerce has been on the rise because of the convenience, efficiency, and relatively low prices offered.

Amazon debuted an online payment system on Monday in an effort to expand into money transfer services, Reuters reported. The new service will allow more than 240 million active monthly users of Amazon to use their stored credit and debit card information to pay for outside subscriptions such as cellphone payments or music subscriptions, for which Amazon will charge a fee. This subscription billing system is an extension of Amazon’s previous efforts to compete with PayPal and other online payment service companies such as Braintree, Stripe, and Google Wallet.

T = Technicals on the Stock Chart Are Mixed

Amazon stock has been pulling back in recent times. However, the stock is currently surging higher and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Amazon is trading between its rising key averages, which signals neutral price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Amazon options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Amazon options

30.13%

60%

58%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Average

Average

August Options

Average

Average

As of Monday, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.