Amazon.com (NASDAQ: AMZN) may have disappointed shareholders Friday with another earnings miss, but all I see is opportunity.
At this very moment, there is a screaming post-earnings buy signal on the charts that has worked out 100% of the time over the past two years. This signal is not something most investors would spot, but I use it frequently -- and with great success.
It doesn't hurt that I'm intimate with Amazon's chart patterns, statistics and earnings trends. Our last technical trade in AMZN (although not an earnings-related trade) netted us 51% in less than two months. This time, I see an opportunity for 65% gains before year end.
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AMZN sold off to the tune off 8% Friday following its third-quarter earnings release after the close on Thursday. If investors were truly running for the hills, though, we would have seen a much more violent move and the rally from the pre-market prices would have been absent. ?CEO Jeff Bezos has been very clear with investors and the media that he is focused on the bigger picture rather than quarterly results. Back in 1997, he informed them that he would be spending money to expand Amazon's empire, and from time to time, the company would incur losses as it grew.
While Amazon may be missing on the bottom line, its customer base and revenues are growing. Like Bezos, I see the bigger bullish picture for AMZN. But what's more important today is the chart action.
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Trading Amazon's Earnings Reversal
Trading earnings is one of my specialties. As an options trader, I focused heavily on the action leading up to an earnings announcement. I gauged bullish or bearish sentiment and estimated how big of a move a stock would make once the report was out.
Most of the time, I would enter a trade ahead of the report and exit almost immediately after earnings were released.
As the years of successful pre-earnings trades went by, I began to notice a large number of stocks that performed what I call an "earnings reversal."
When a stock is trending (either bullish or bearish), its earnings report can accelerate it in the direction of the trend. An earnings reversal occurs when shares move outside of their Bollinger Bands, creating an overbought or oversold condition from which the stock then reverses.
Essentially, the reaction to earnings pushes the stock too far in one direction, and if the conditions are right, a short-term reversal occurs and thrusts the stock in the opposite direction, often in a big way.
In the case of Amazon, this powerful signal was triggered after seven of the past eight earnings reports. In each instance, if a trader went long or short (depending on the nature of the signal) at the close the day following the announcement, they would have made an average of 11.4% before the next report was issued.
The most dramatic earnings reversal came in April 2013. AMZN was in a bearish trend when it gapped lower following its report. Traders who entered a bullish position at the close on April 26, 2013, made 21% in just three months.
The signal I'm seeing right now looks just as strong as the one I spotted then.
AMZN closed Friday at $287.06. Simply moving back to its pre-earnings close of $313.18 would only require a 9% gain, less than the 11% average move the stock has made after every signal in the past two years.
With a call option strategy, we can leverage that 9% gain into 65% profits in two months.
AMZN Call Option Trade
Today, I am interested in buying AMZN Dec 270 Calls for a limit price of $26.
Risk graph courtesy of tradeMONSTER
This call option has a delta of 72, which means it will move roughly $0.72 for every dollar that AMZN moves, but it costs a fraction of the price of the stock.
The trade breaks even at $296 ($270 strike price plus $26 options premium), which is 3% above current prices.
If AMZN hits my upside target of $313, then the call options will be worth at least $43. Once you enter the trade, place a good 'til cancelled (GTC) order to sell your calls at that price.
Recommended Trade Setup:
-- Buy AMZN Dec 270 Calls at $26 or less (use limit orders)
-- Set stop-loss at $13
-- Set price target at $43 for a potential 65% gain in two months
Chrysler via AP DETROIT -- Fiat Chrysler (FCAU) is recalling more than 566,000 trucks and SUVs in two recalls for malfunctioning fuel heaters that can cause fires and a software glitch can disable the electronic stability control. The recalls bring the newly merged company's total for the year to 6.4 million vehicles worldwide and 5.1 million in the U.S. as it continues to struggle with reliability problems. It wasn't immediately clear whether those totals were annual records. On Tuesday, its longtime quality chief abruptly left after Fiat Chrysler performed poorly in Consumer Reports magazine's annual reliability rankings. The largest of two recalls announced Wednesday covers almost 382,000 Ram 2500 and 3500 pickups and Ram 4500 and 5500 chassis cabs from 2010 through 2014. In trucks with 6.7-Liter Cummins diesel engines, corrosion on a fuel heater terminal could cause overheating, fuel leaks and fires. Chrysler isn't aware of any fires or injuries. Owners could be warned by an odor of diesel fuel. Customers will be notified by letters starting in December. Dealers will install upgraded terminals and fuel heater housings could be replaced. The second recall covers more than 184,000 Jeep Grand Cherokee and Dodge Durango SUVs from 2014. A debris cover over a circuit board in the steering column control module can disrupt communications and disable the stability control. The problem was discovered when dealers started getting reports from customers that electronic stability control warning lights were coming on. Fiat Chrysler says it knows of no crashes or injuries caused by the problem. Technicians will upgrade software to fix the SUVs, and customers will be notified in December. Fiat Chrysler has issued 33 global recalls and 27 in the U.S. so far this year. Doug Betts, its longtime quality chief, left the company to pursue other options after Consumer Reports' survey-based rankings this year showed four Fiat Chrysler brands at the bottom of its list. Dodge, Ram, Jeep and Fiat performed worst of 28 brands ranked by the magazine. Company spokesman Eric Mayne said Fiat Chrysler's recalls average fewer than 200,000 vehicles each, below the industry average of 301,000. That means the company is responding quickly to problems, he said, adding that eight of its 27 U.S. recalls were announced before the company received any consumer complaints. Chrysler isn't alone with a high number of recalls so far this year. Stericycle, a company that tracks recalls, says companies have called back more than 52 million vehicles so far this year, breaking a record set in 2004. MSRP: $26,495 Resale value retained after five years: 50.5 percent Even under Fiat (FIATY) ownership, some elements of Dodge's mouth-breathing, knuckle-dragging, He-Man-Woman-Haters-Club approach to auto sales managed to survive. The built-by-car-guys-for-car-guys Challenger and its rebooted muscle car aesthetic still lingers to lure meatheads who value racing stripes and rims over, oh, just about any other element of their vehicle. Ordinarily, that alone wouldn't make one of these vehicles worth a second look five years from now -- even among the most superficial gearheads. But Fiat helped the Challenger smarten up a little bit by coupling a 305-horsepower V6 engine or 375-horsepower 5.7-liter V8 Hemi with loads of interior space, real-time touchscreen navigation, traffic updates, Bluetooth connectivity, Sirius (SIRI) XM satellite radio, keyless entry/starter and a whole lot of Harman Kardon audio upgrades.
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Getty Images NEW YORK -- It happens to the best of us: you let an old debt get too far. No longer merely a collection, the debt has become a judgment. This means that a court has found against you and your debt is a matter of public record. It's stuck on there for the next 10 years, right? Wrong. In fact, there are ways to get judgments off of your credit report that are relatively painless. Pay For Removal? One of the main things people will do to get a judgment taken off of their credit report is pay it. Sometimes this is done under a "pay for removal" understanding. However, Mike Sullivan of Take Charge America, points out that pay for removal isn't an option once you have a judgment. "If [your outstanding payment] is 90 days late you can negotiate," he says, "A judgment is a public record." This is because a judgment is entered by the courts, not your creditor. So your quest to get a judgment taken off of your credit report will begin with contacting the court who made the judgment. But can you even get a judgment taken off of your credit report once it has been entered into the public record? So Can You Remove It? The short answer is yes. In fact, Randy Padawer, a consumer advocate at Lexington Law, is a little more bullish on removing judgments. "I actually think removing judgments are some of the easiest things to do," he says, going so far as to say "recent 30-day-lates are much harder to remove than judgments." Padawer says this is because the courthouses and specialty data brokers who act as their intermediaries are, in his words, "notoriously terrible at meeting their legally required options when it comes to substantiating data reporting." What this means, in effect, is that they don't keep good enough records for the judgment to survive scrutiny. If you challenge a judgment, Padawer believes that more often than not, courts and third-party data brokers will fold without a fight. "You start out by asking them to substantiate the judgment," he says. This is basically just writing a letter and asking the court to prove that the judgment is valid and provide you with relevant information. "You have every right to ask questions about your judgment," he says. In some cases, this might be enough to get the judgment removed. What Kind of Information Can Invalidate a Judgment? Provided that you collect the information, but the judgment, lien or other public record remains on your credit report, where do you go from there? Any kind of inaccuracy can mean that the judgment will be vacated. You might still have to settle the debt, but the judgment can be removed. "If you have something that says 'James L. Smith' and your name is 'James P. Smith,' it can be as easy as bringing in your birth certificate," says Sullivan. He further points out that the burden of proof is on the creditor to demonstrate that the debt is legitimate -- not on you to prove that the debt isn't yours. Padawer notes that basically any kind of inconsistency in the judgment can lead to its being removed from your credit report or vacated. "If the amounts are incorrect, if the dates are incorrect, if anything about it is incorrect, it needs to be modified or removed," he says. What's more, if you have proof that what you paid the company is more than what's being requested under the judgment, this is also cause for removal. For those who have received tax liens, the process is much easier: you can get any tax lien that you've paid off removed from your credit report. However, you have to actually request having it removed. When it comes down to it, though, Sullivan urges people to contest judgments at the time, rather than blowing off a notice they might receive in the mail. "After the fact, your burden of proof is a little higher," he says. "It's amazing how many people do not contest judgments when they get a letter. It's much, much easier to do it in court."