Pro Trader Today publisher Dave Roberts and I are attending a conference at Jacksonville’s Atlantic Beach, so I’m gonna have to keep today’s shining nuggets of stock market insight brief.
Index futures are down after Microsoft reported what I guess you’d call mixed quarterly earnings last night – very slight beat on earnings, very slight miss on earnings. But you know how it is when anything misses – the stock is down, and one analyst already lowered full year growth estimates from 7% to 4%.
I’m mostly interested in Microsoft’s cloud business, because I’m looking for an entry point for an upside trade on Microsoft’s cloud competitor Amazon. As I told you last week:
I did well with Amazon last week as it jumped over its 50-day MA. The stock is just over $98. I wouldn’t expect it to move over $100 on its first attempt, but when it does, another 10% run to fill the gap at $110 looks doable.
Amazon is trading down to the $93-$94 range on the heels of Microsoft’s weakness.
Microsoft’s Intelligent Cloud division grew 18% in the quarter, and its Azure division grew 31%. That’s decent growth, even though last year, growth for these areas was 26% and 46%, respectively.
Now, Amazon shares have performed much worse than Microsoft over the last year. But if investors get the feeling that Amazon can put up similar metrics for its Amazon Web Services as what we saw from Microsoft, I think Amazon will rally. And from current levels, that sets up for a nice trade.
Here’s the chart:
The highlighted circle shows the gap up to $110 that needs to get filled. Amazon has already broken over the 50-day moving average (purple line), which currently sits at $91.32. I added the green line to show where support is: $92.50.
Risk/reward looks very favorable. Amazon reports earnings next Thursday. If I can get the 100 strike Amazon calls that expire next week for around $1, I’m gonna do it.
That’s my trading plan for today, take care and I’ll talk to you on Friday.
Pro Trader Today