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The long wait is over. We wanted to see if the recent rise in Amazon.com, Inc. (NASDAQ: AMZN ) shares was justified, and it was. The rally in AMZN stock was built on sound footing, as Thursday night's earnings release beat estimates handily.
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Amazon scored $1.48 in earnings per share, sailing easily past analyst estimates of $1.13. The Street rewarded the retail juggernaut with an overnight gap of 3.3%.
But, it turns out the gains were more trick than treat. That is, unless you sold your shares at the opening bell.
With an hour left in the trading session, Amazon stock's gains have all but dissipated. That's right. Today's gap was one of the crapping variety - a gap-n-crap, as they say. It's a classic example of a "sell the news" reaction. Rather than buying up shares in response to the robust earnings growth, many shareholders rang the register.
So what does today's nasty bearish candle portend the future?
Well, for starters, there's no doubt a short-term top has been put in place. But if you're an AMZN stock lover, don't let that deter you. Shares might have just gotten a little bit ahead of itself. It would be foolish to make longer-term forecasts based off of one day's action. The uptrend for Amazon is still firmly in place, making any further downside in the stock an attractive buying opportunity.
If anything, today's give-back should be viewed as a gift for spectators who missed the earnings jump. Instead of having to chase at $950, you now have a shot at the stock in the $925 zone.
And, who knows? If we get some downside follow-through, perhaps the $900 level will come into play.
Don't Fret This Gap-Fill. Profits Await in AMZN Stock.
If you're willing to bet this price drop, be it a one-day or multiday event, is a buying opportunity, then I suggest selling an out-of-the-money bull put spread. You can structure quite the large profit range, allowing Amazon a wide berth in case the post-earnings selling intensifies.
Sell the June $875/$870 bull put spread for 80 cents credit.
You will capture the max reward of 80 cents if the stock sits above $875 at expiration. The max risk is $4.20 and will be lost if Amazon stock falls below $870 by expiration. If you're looking for confirmation before pulling the trigger, then consider waiting until next week to see the stock can shake off today's downturn.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
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The post Buy the Amazon.com, Inc. (AMZN) Stock "Gap 'n' Crap" appeared first on InvestorPlace .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
