Trader sees a perfect 'buying opportunity' for Amazon

It could be the best chance this year to buy Amazon, said TradingAnalysis.com founder Todd Gordon

The tech giant is sitting in a correction, down more than 10 percent from its recent high on Sept. 4, but Gordon says there's a key technical level that has him betting on an Amazon bounce back.

"Amazon has pulled back into support with this overall market volatility, but I see it as a buying opportunity," he said Tuesday on CNBC's "Trading Nation."

According to Gordon, Amazon is looking oversold. On a year-to-date chart of the stock, he said that Amazon has pulled back to an uptrend support line that had been in place since February. And given that Gordon believes the bottom is in for tech and consumer discretionary stocks, which have fallen 3 percent and 4 percent this month respectively, he sees Amazon bouncing from that support line.

Amazon is expected to report earnings at the end of the month, and Gordon is using that date and targets levels around the $1,860 to $1,870 area.

Gordon is selling the October 26 weekly 1,880-strike put and buying the October 26 weekly 1,870-strike put for a credit of about $4.50, or $450 total. This means that if Amazon closes above $1,880 on Oct. 26 expiration, then Gordon would make the $450 credit on the trade. But if Amazon closes below $1,870, essentially falling beneath the support line he points out, then Gordon could lose up to $550.

On Wednesday, Amazon was trading around $1,855, and despite this month's plunge the stock is still up more than 58 percent this year.

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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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