It seems that Amazon (NASDAQ: AMZN) just continues to do things right! Not only is it healthy and the top online global retailer, but it is coming out with new products-- especially the Kindle Fire that should keep the revenue stream coming. It is a pricey stock, and if one is not interested in placing money with the company there are other ways to make money with the stock.
Remember it's the Kindle that is the revenue stream. Look what Amazon is doing this year.
Amazon is on Fire - Kindle Fire
Amazon is very healthy and one of the qualities that make it so exciting is its constant new products and/or updates coming out. It is again planning to battle Apple (NASDAQ: AAPL) in a tablet type war. It is rumored that three types of Kindle Fires will be released this fall:
- Amazon will kick off its tablet assault with a low-cost upgrade that features a 1,024×600 display. Similar to the original Kindle Fire, this tablet will not contain a camera.
- Another version of the Kindle Fire 2 will feature a camera, as well as a 1,280×800 display.
- In September, Amazon will begin producing a third version of the tablet that mirrors the camera/high-res model but also supports 4G
The Kindle Fire is a popular little tablet! It is the most popular Android tablet among the American public right now, and it only took four months to get there. Statistically it owns 54.4% of the Android tablet market while another well know name-Samsung Galaxy family can only claim 15.4%. And the Kindle Fire continues to attract more and more customers with its host of features and appealing affordable price.
Ascending Triangular Pattern
Amazon appears to have formed an "ascending triangle." Because of its shape, the pattern can also be referred to as a right-angle triangle. Two or more equal highs form a horizontal line at the top. Ascending triangles are generally considered bullish and are most reliable when found in an uptrend. In ascending triangles, the market becomes overbought and prices are turned back. Buying then re-enters the market and prices soon reach their old highs, where they are once again turned back. Buying then resurfaces, although at a higher level than before. Prices eventually break through the old highs and are propelled even higher as new buying comes in.
The Options Trade
The stock has filled the gap as much as it is going to. Now I believe it will continue to move up. Much of the momentum will continue because of the Kindle Fire selling so well. We are looking at a Bull Call Spread for an options play. The stock is presently trading at 222.31
- Buy an October 2012 call with a strike of '225' (priced at $14.50)
- Sell an October 2012 call with a strike of '230' (priced at $11.95)
- Net Debit to Start: $2.55
- Maximum Profit: $2.45
- Maximum Risk: net debit
- Maximum Length of Play: 4 months
Reasoning behind the play:
- Kindle Fire is a top seller and continues to be a revenue producer.
- New products coming out this fall will keep the revenue momentum coming.
- The ascending triangle is a bullish continuation pattern.