To The Moon

$Amazon.com(AMZN)$ has recently reached a pivotal juncture on its price chart that presents an intriguing trading opportunity. Historically, it served as a robust support level throughout 2020-2021. However, in 2022, this level transformed into a formidable resistance.

AMZN Weekly Chart

The Setup

A breakout above this significant resistance could signify a bullish reversal, potentially propelling the price back into the 2020-2021 range. Conversely, a rejection at this level may lead to a price decline, mirroring the previous attempt in August 2022.

Trade Strategy

Given the potential for a bullish breakout, I am considering buying calls / selling puts.

1. Look for out-of-the-money (OTM) Call Options with a strike price slightly above the current resistance-turned-support level. Ensure the options have an expiration date that aligns with your trading timeframe.

2. Limit your risk by not allocating more capital than you can afford to lose. Remember that options trading carries inherent risks, so it's crucial to have a well-defined risk management strategy in place.

3. Determine specific profit-taking levels and stop-loss points before entering the trade. Stick to your predetermined plan, as emotions can influence trading decisions.

4. Keep a close eye on Amazon's news and market developments, as these factors can significantly impact the stock's price.

5. Be patient and watch for a clear breakout above the resistance level. Ensure that the breakout is accompanied by strong trading volume, indicating conviction in the move.

6. Use technical indicators like moving averages, relative strength index (RSI), and MACD to confirm the strength of the breakout.

7. If the trade goes against you, be prepared to cut losses and reassess your position.

Remember that options trading can be complex and risky, so it's advisable to have a good understanding of options before implementing this strategy. Additionally, consider conducting thorough research to make informed trading decisions.

Disclaimer: The levels given are my own opinions and not investment advice. If you choose to follow the trade, do note that you are responsible for your own money. Prioritise your own risk management, expel emotions & focus on your trading plan. [Grin] 

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