I’m eyeing a trade on one of the biggest AI/tech stocks in the market.
The most recent earnings report on July 30th detailed a booming business that showed no signs of slowing down.
And the chart just started making higher highs and higher lows…
That’s an uptrend.
It’s the top stock on my watchlist.
The stock surged after the earnings report in late July, and for good reason…
Its AI business and custom chips each topped $25 billion in annualized revenue, more than doubling year-over-year. Meanwhile, operating income jumped 43% to $27.5 billion on revenue of $200.6 billion, up 20%.
But since then it’s drifted lower.
Until this week… We’re getting in on the ground floor.
AMZN Web Services
Amazon.com Inc. (NASDAQ: AMZN) released its Q2 numbers on July 30, and Amazon Web Services stole the show.
AWS pulled in $42.2 billion in revenue, up nearly 37% from a year ago. That’s its fastest growth since 2021. And it beat Wall Street’s estimate of $40.5 billion.
Even better, the growth is speeding up. AWS grew 28% in Q1. This was the fifth straight quarter of acceleration.
And it’s printing money. AWS posted a 39% operating margin, which accounts for roughly 60% of Amazon’s total operating income.
Plus, Amazon’s committed future revenue hit $496 billion with a massive pipeline of customer contracts including new deals with Meta and OpenAI.
The rest of the business held up too. Ad revenue jumped 26% to $19.8 billion, and the core retail business accelerated to 15% growth.
But on the chart, after peaking in the mid-$280s in early August, AMZN slowly bled lower.
Nothing in the business changed. The numbers are still the numbers. The market just cooled off after a big run.
And the next catalyst is right around the corner. Amazon’s Q3 report is expected on October 29.
The Chart
Here’s another look at the daily chart from the last six months…
To see the recent change in sentiment we have to zoom in a bit…
Notice the most recent peak is higher than the previous peak: $259.49 vs $257.59. And the most recent trough is higher than the previous trough: $244.72 vs $244.30 .
Higher highs and higher lows.
It’s a textbook example of a stock turning from a downtrend to an uptrend.
I’m interested in the AMZN Nov. 6 $270 Calls.
That expiration date gives the market time to work itself into a bullish frenzy as the Oct. 29 earnings date approaches.
AMZN is a powerhouse in the AI sector. And while the rest of the market sleeps on it, I’m planning an entry for the coming rally.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
