Buy Alert: March 18, 2013

Marcus Haber | March 18, 2013

Buy Alert: March 18, 2013

Trade Details

Buy Amazon.com (AMZN) April 2013 $280 Calls for $1.25 or better

Why?

I’ll admit it, I’m a sucker for AMZN. It’s my favorite stock and I always look at any dip in the stock price as a buying opportunity. And, this recent dip is no different.

AMZN shares have pulled back the last couple days on news of a JP Morgan (JPM) downgrade. Moreover, the market is selling off in general due to a bank bailout in Cyprus. (It’s Cyprus now? Really?)

Let’s just focus on the downgrade, as I’m not all that worried about long-term effects to the US from the Cyprus aftermath. JPM analysts are concerned that Amazon’s margins are going to shrink. AMZN is transitioning from first party to third party sales, and some feel that process could hurt profits.

Haven’t investors learned by now?

Jeff Bezos, the CEO of AMZN, has consistently proven the second-guessers wrong. It seems like every time the analysts question his methods, the company’s results come out better than ever. If Bezos believes transitioning to third-party sales is the way to go, I plan on trusting his judgment.

The stock is now trading below its 20-day and 50-day moving average. We’re going to grab the $280 calls, although it won’t have to climb that high for our options to double in value or more.

We’re sticking with April options in this case. I expect the turnaround to be quick.