Amazon is ‘knocking on the door’ for a breakout to $1,500, says trader

Amazon is just one click away from crossing $1,500, says TradingAnalysis.com founder Todd Gordon.

Shares of the online retailer are up 25 percent this year and trading just 1 percent below the next round-number milestone. The trader sees two bullish signs in charts of Amazon that lead him to believe a big bounce is ahead for the stock.

First, Gordon points out that Amazon has outperformed the Nasdaq 100-tracking ETF (QQQ).

"You can see that the Nasdaq QQQ has not taken out its highs, [and right now] we have done about a three-quarter retracement of what we've lost since Jan. 26," he said Tuesday on CNBC's"Trading Nation." "But we can see that Amazon is knocking on the door here for a breakout."

In addition to outperforming the QQQ, Gordon sees a bullish "inverse head and shoulders" pattern that he says could be the "launching pad" that could take the stock up to $1,500.

Given the high implied volatility, or price of options, for the stock, Gordon wants to sell a put spread. He sold the March 29 weekly 1,440-strike puts and paired them with the purchase of the March 29 weekly 1,430-strike puts for a credit of just under $4. Should Amazon close above $1,440 on March 29 expiration, Gordon would make around $400, which is what he collected for the trade.

But should Amazon tank and close below $1,430 on expiration, then Gordon could lose about $600. To prevent such a loss, Gordon recommended putting in a stop on the trade of around $1,440.

Amazon has surged 26 percent year to date.

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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.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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