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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.

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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