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This FANG Company Hits a Golden Cross

This FANG Company Hits a Golden Cross

It’s been a great few weeks for shares of Amazon (AMZN), and a key technical indicator shows that the trend is likely to continue.

That trend is a “golden cross,” where a company’s 50-day moving average passes above its 200-day moving average.

This cross shows that shares are heading higher, and a company is starting to break out of a flatter or declining trend. Some traders may use different sets of short and long-term moving averages, but the effect is the same.

In the case of Amazon, the company has underperformed for the past two years. First, it set an all-time high in September 2018 and then slid into a sideways pattern in 2019, missing out on the market rally there.


But with its recent massive earnings beat, shares are starting to head higher. Now they’ve even broken out to new all-time highs.

The golden cross is confirmation of this new uptrend, which is likely to continue for several months.

To play this trend, an investor simply needs to buy shares. There’s no historical data to indicate how long such a trend will last, but shares will likely see another 10 to 15 percent rally from here.

A reversal of the trend, known as a death cross, would be a good indication to get out of the trade. In a death cross, the 50-day moving average drops below the 200-day moving average and suggests weakness.

After a big move higher, a death cross happens at a higher price than where the golden cross started, so traders should be able to lock in profits no matter what.

For traders, or just investors who want to play this trend over the next few months, the June 2020 $2,200 calls, look attractive.

Although they cost around $80 right now, or $8,000 per contract, it’s for 100 shares of a company trading in the $2,000 range likely to head higher in the next few months. Traders can expect to get a 40-50 percent gain from a 10 percent move in shares while putting up far less capital.