Amazon (AMZN) - Get Report stock has experienced volatility right after earnings lately. The daily chart for Amazon shows that the stock has had significant share price spikes higher following earnings reports in January, April and July. In January, the online retailer beat earnings-per-share estimates. In April and July, the company was expected to report a loss. In April, the loss was a penny better than expected, and in July, Amazon reported positive earnings instead of a loss -- hence the huge price spike.
Only one of these price gaps was filled, as Amazon was a victim of the flash crash on Aug. 24, "Black Monday," which more than filled the July price gap.
The stock has been above a "golden cross" since Feb. 20. (A "golden cross" occurs when a stock's 50-day simple moving average rises above its 200-day simple moving average, a technical signal that additional share price gains lie ahead.)
Analysts expect Amazon to report a loss of 10 cents a share when it reports earnings after the closing bell on Thursday. On Tuesday, the online retail giant announced that it is hiring 100,000 temporary workers for its fulfillment centers for the upcoming holiday season. The company is expected to increase revenue by 20% year over year, which will likely be a more important earnings metric than earnings per share.
So how should investors trade Amazon around its earnings report? Let's turn to the daily chart for Amazon to begin to answer that.
Courtesy of MetaStock Xenith
The daily chart shows that Amazon had a close of $560.88 on Tuesday, up 9.6% so far in October and up 80.7% year to date.
The price gap from the close of $311.78 on Jan. 29 to the open of $346.32 on Jan. 30 was 11%. That was in reaction to earnings released after the closing bell on Jan. 29. This gap also moved the stock above its 200-day simple moving average.
On Feb. 20, there was a "golden cross," where the 50-day simple moving average moved above its 200-day simple moving average. This signal indicated that the stock is set to move higher -- and it did, significantly.
The second price gap higher occurred on April 24, following a positive reaction to earnings released after the closing bell on April 23. The gap between the close of $389.99 on April 23 to the open of $439.00 on April 24 totaled 12.6%.
The third price gap higher occurred on July 24, following a positive reaction to earnings on July 23. The gap between the close of $482.18 on July 23 to the open of $578.99 on July 24 totaled 20%.
The stock easily survived the flash crash of Aug. 24. The stock opened lower by 6.2% and was briefly in bear market territory, as the low of $451.00 was 22.3% below the all-time high.
The stock is well above its 50-day and 200-day simple moving averages of $526.17 and $435.97, respectively.
Here's the weekly chart for Amazon.
Courtesy of MetaStock Xenith
The weekly chart for Amazon is positive, with the stock above its key weekly moving average of $537.82. The stock is way above its 200-week simple moving average of $316.77, last tested during the week of Jan. 30, 2009, when the average was $53.26. The weekly momentum reading is projected to rise to 74.36 this week, up from 69.17 on Oct. 16.
Momentum scales from 00.00 to 100.00, with a reading below 20.00 oversold and a reading above 80.00 overbought. This study is shown in red along the bottom of the chart.
Investors looking to buy Amazon should place a good till canceled limit order to buy the stock if its drops to $470.58, which is a key level on technical charts until the end of 2015.
There's a monthly key level of $558.84, which has been a magnet in October.
Investors looking to reduce holdings should place a good till canceled limit order to sell the stock if it rises to $577.71, which is a key level on technical charts until the end of this week.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.