A Rough Patch for Amazon

Amazon (AMZN) is starting to resemble Google (GOOG) a bit. Even after its post-earnings rebound, the chart hasn't been able to shake the bearish megaphone pattern that it had set up prior to the report. Often chart patterns disintegrate with an earnings announcement, but this one has held tough, and it makes me believe Amazon will see the $295 level before it'll reach the $312.50-to-$315 area. This is a tough call, given a broad market that refuses to fall, but it is what I see.

Amazon (AMZN) -- Daily Source: StockCharts.com View Chart » View in New Window »

After Amazon's last earnings report, I was left with a strangle in the stock. At this point, I've moved forward with selling the Aug. 16 $325 call/$285 put strangle, and I've bought half as many Aug. 16 $315 call/$295 put strangles. Further, since this is uncovered, I've added some weekly ratio spreads against most of the strangles. I used a ratio spread that's long 1 by short 2, with the long strike coming in closest to the current share price. On the put side, I have the $300 by $295, and on the call side, I have the $310 by $315. If Amazon closes above $295 or below $315, I will look to do something similar again next week....152 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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