There is no question, Amazon.com (NASDAQ:AMZN) is the king when it comes to online retail and many other things. However, that does not mean kings do not fall hard on occasion. Just a couple months ago I shorted AMZN at $1,212 and covered on the dip below $1,150. The key was finding the technical chart signals that gave a great risk/reward.
The Trade Setup
With Amazon.com back above $1,200, I am again scoping out a trade setup. There is a great risk/reward setup on the chart at key resistance $1,205. The beauty of this trade is that the stop is literally only $8 away at $1,213.41 (a close above). This level is the all-time high and gives investors such a tiny risk that it's hard to say 'no,' even if you are the biggest bull on Amazon.com. The downside is big; not only could Amazon potentially hit its recent lows of $1,120, but it will likely trade as low as $1,080. That gives a risk/reward profile of $8 risk versus more than $125 reward. A setup like this is a rarity indeed.
