On Tuesday, the US Department of Defense screwed up its JEDI cloud computing project, a $10 billion, Trump administration agreement with Microsoft (NASDAQ:). Instead, the DoD announced that "a new contract is expected to include its rival Amazon.com and possibly other cloud players."
Shares of Amazon (NASDAQ:) skyrocketed on the news. Shares of the e-tail giant closed $164 higher, gaining 4.7%. Microsoft fell a whopping 1.2% on the news but ended flat.
The original contract has been put on hold since Amazon filed a lawsuit essentially alleging the award was a political move by then-President Donald Trump, who put undue pressure on the military to send the contract away from Amazon. The former president famously mocked the Seattle-based company and repeatedly stabbed its CEO, Jeff Bezos, in public.
In addition to boosting Amazon's stock, yesterday's rally has "raised Bezos' fortune by $8.4 billion," according to Bloomberg, making him the world's richest man, now reaching a record value of $211. billion. Beautiful 'revenge' for a man who endured years of Trump derision.
AMZN shares also hit a new all-time high for the first time since September, beyond the range it has been locked in since. Is the stock now poised to reach even greater heights, making Bezos' level of prosperity may end up in the stratosphere?
Yesterday the stock price shot past the top of the range it was stuck in, fueled in part by a market spring mechanism – the falling flag. Note the sharp advance that preceded the flag, driven by inflation fears and a resurgence of the Delta variant around the world that brought the pandemic market-lovers back into play.
That 11% jump led to profit taking, causing the dip. Strong interest in the stock kept it tight, however, until the breakout upward signaled a resumption of the underlying uptrend, with a minimum of the same $350 move that created the flagpole, repeating from the breakout point.
On top of that target, a broken range is expected to repeat the same height above the range as below its top. Finally, the longer the range, the more momentum it would have, given the significant investor interest in the stock that caused the price to move in the pattern. Conservative traders should wait for a return move to retest the top of the range, if not the flag, before considering a long position.
Moderate traders would wait for the same dip, for the reduced exposure, if not for confirmation of the revival uptrend.
Aggressive traders could enter at will, provided they trade on a plan that justifies the risk. Here is an example.
Trade Sample
Input: $3,600
Stop Loss: $3,550
Risk: $50
Goal: $4,000
Reward: $400
Risk: Reward Ratio: 1:8
