Amazon (AMZN) Could Break Through $198.42 Resistance Level

Posted: Friday, January 27, 2012 8:13 AM EDT
By: Market Intelligence Center Staff

Amazon (NASDAQ:AMZN) closed Thursday's unfavorable trading session at $193.32. In the past year, the stock has hit a 52-week low of $160.59 and 52-week high of $246.71. Amazon (AMZN) stock has been showing support around $186.18 and resistance in the $198.42 range. Technical indicators for the stock are Bullish and S&P gives Amazon (AMZN) a neutral 3 STARS (out of 5) hold rating. For a hedged play on Amazon (AMZN), look at the Mar '12 $200.00 covered call for a net debit in the $185.57 area. That is also the break-even stock price for this trade. This covered call has a duration of 50 days, provides 4.01% downside protection and an assigned return rate of 7.78% for an annualized return rate of 56.77% (for comparison purposes only). A lower-cost hedged play for Amazon (AMZN) would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the Amazon (AMZN) Jan '13 $105.00 call and selling the Mar '12 $200.00 call for a total debit of $83.65. The trade has a lifespan of 50 days and would provide 2.42% downside protection and an assigned return rate of 13.57% for an annualized return rate of 99% (for comparison purposes only). Amazon (AMZN) has a current trailing average dividend yield of 0%. [MarketIntelligenceCenter.com]