Amazon could surge into uncharted territory next year, says technician

High-flying Amazon's record run will continue into next year.

That's according to Todd Gordon, founder of TradingAnalysis.com, who says the charts are pointing to record highs for Amazon in early 2018. The online retailer has already surged 58 percent this year, and Gordon says the stock is poised to exceed the $1,200 mark.

"[There has been a] very nice uptrend that has been in place since the end of the fall of 2017, and it looks like it's continuing up through the winter and early part of 2018," he said Thursday on CNBC's "Trading Nation." "The first thing I'll draw your attention to is the first significant correction we saw here in late October was roughly equal to the size of the correction that we saw here in the end of November into December."

This symmetry gives the technician faith that following the consolidation in Amazon that has happened recently, the stock will be ready to break through $1,200.

To establish a trade in Amazon, Gordon looks at the stock's performance over the past several weeks. He points out that a key support level for Amazon is now around $1,170, which used to be resistance until this month, when the stock would bounce from that level after falling down. Gordon believes that given the momentum Amazon has seen, he would only be concerned if the stock were to fall below that support level to around $1,160.

As a result, Gordon wants to sell the Feb. 2 weekly 1,155-strike put and pair that with the purchase of the Feb. 2 weekly 1,150-strike put for $1.60 credit, or $160 credit per options spread. The $160 becomes the maximum reward that Gordon could get on the trade provided that Amazon closes above $1,155 on Feb. 2 expiration. If Amazon were to close below $1,150 on Feb. 2, then Gordon would see a maximum loss of $340.

Despite the skewed risk-to-reward ratio, Gordon isn't concerned as the key levels for his trade are about $30 lower than from where shares of Amazon were trading Thursday. In order for Gordon to see that maximum loss, Amazon would have to fall more than 3 percent below current levels.

The online retailer closed at $1,186.10 on Thursday.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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