AMZN - My CPI Watchlist Lead

Tomorrow is the CPI report. It's a bit hard to speculate what the results may be, March overall was all over the place. There was a ceasefire, then we saw the oil prices spike up, we had a recovery in the stock market in the last days of the month.

I'm running the same analysis as yesterday, simply because today proved to be accurate and we saw the industrials take the lead during the big part of the day. The dashboard below, demonstrates the leading Index and the leading ETF today.

Now, the last time I had a successful option trade I looked at the sector rotation and focused on the put/call ratio, I intend to do the same this time with one of the holdings within XLY (Discretionary). The reason being, I won't hold it for long, it will be a swing trade. Secondly, the CPI report is tomorrow, and while I personally don't believe the inflation has cooled down, the last couple of days may have influenced that report, it's hard to tell.

With that said, I am looking at Amazon as it is the top holding on XLY. In addition to this, AMZN has remained bullish for the most part, which can be a red flag, but the ratio is proving to be a bullish outlook. Today alone, we saw a $12 increase in its price point. Let's look at the ratio first:

When taking the puts/calls, we obtain a 0.44, less than half in the ratio which immediately tells us there are more calls being placed. Given today's rally, I do believe that I need to be careful with the price target. Let's chart it and see what where we are today and if we have a good angle.

1. We are in an overbought position, and while it may remain there for a while, we can expect a retraction day tomorrow. Specially during the first hour and a half post opening. This means, we don't rush to a contract.
2. The last time AMZN was ~$230 was back in early February, and we are now seeing it starting to recover and reach its high again. If the analysis is correct, we can aim for another $12 increase in the next days.
3. Tomorrow is Friday of CPI, which means that the different sectors might shift with the news dropping at 8:30AM. At the same time, we have had weekends filled with noise around the war that continue to shift the narrative and shift the currents of the market.

Now, in the past, I saw this strategy play out in both ends. However, when it didn't play out as expected, it was due to massive news from Delta. I don't expect random news from Amazon in the morning, therefore we can monitor it for the first hour and a half after the noise.

While I'm not guaranteeing an entry for myself tomorrow, I will 100% consider it if the CPI is in my favor and if the AMZN sales are available by 10:30AM. If I go in, I am still only willing to risk 25% and will not hold the contract for more than 5-7 days. Let's see what's in store tomorrow.