Case Study: Amazon.com, Inc. (AMZN)

Trade Setup

In mid-2020, I noticed that AMZN was experiencing a significant increase in demand for its cloud computing services, driven by the COVID-19 pandemic. The company’s revenue and earnings were consistently beating analyst estimates, and I believed its stock price would continue to rise.

Entry

On July 23, 2020, AMZN reported its Q2 2020 earnings, which beat analyst estimates by a wide margin. The stock price surged to a new all-time high of $3,344.29. I entered a long position at $3,350.00, with a stop-loss at $3,200.00, just below the previous support level.

Trade Management

As the trade progressed, I adjusted my stop-loss to lock in profits. On August 5, 2020, AMZN reached a new high of $3,552.25, and I raised my stop-loss to $3,450.00. This ensured that I would at least break even if the stock pulled back.

Exit

On September 1, 2020, AMZN announced a 20-for-1 stock split, which would take effect on September 4, 2020. I decided to take profits and closed my long position at $3,500.00.

Results

This trade resulted in a profit of $150.00 per share, or a 4.5% return on investment (ROI). The trade duration was approximately 40 days, which is relatively medium-term.

Key Takeaways

Fundamental analysis: AMZN’s strong revenue and earnings growth, driven by increasing demand for its cloud computing services, provided a solid foundation for the trade.
Technical analysis: The stock’s break out to a new all-time high after the Q2 2020 earnings report provided a clear buy signal.