Given the natural ebb and flow of the market, it’s practically instinctive to be skeptical about Amazon (AMZN). It’s not that AMZN stock has been especially remarkable on a year-to-date basis, where it’s up “only” about 17%. Instead, since late April, the equity has shot up around 39%. That’s significant for a mega-capitalization enterprise, meaning that a correction wouldn’t be unexpected.
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Furthermore, AMZN stock is closely tied to the broader technology ecosystem — it’s no longer just an e-commerce powerhouse. The tech sector, which has benefited from the rapid rise of artificial intelligence, is starting to show some signs of unevenness. Yes, you have your Broadcom (AVGO), which gained almost 16% last week. At the same time, you also have your Nvidia (NVDA), which has been uncharacteristically weak, dropping 1.7% last week.
Essentially, the low-hanging fruit of generative AI and related segments, such as cloud computing and data center infrastructure, may have been plucked. Investors are seeking more substantial reasons to consider putting their money at risk, and that’s naturally going to pressure traditional growth names like Amazon.
So, the natural instinct is to wean off Amazon and consider other options. However, I’m going to take a contrarian view on this matter, especially for options traders. If you’re looking for short-term profits, AMZN stock still carries the potential to deliver for opportunistic bulls — indeed, that’s what the data suggests.
Why Out-of-Sample Testing Matters
By logical deduction, an investment-related hypothesis starts from an in-sample discovery; that is, a hypothesis is generated by observing existing data such as price trends, fundamental data, and options flow. Nobody generates a hypothesis from data that has yet to be observed, which would be obviously ludicrous.
However, what separates a genuine market analysis from mere market observations is “out-of-sample testing.” In other words, the claim must be tested against datasets not used to generate the initial discovery. For example, the Santa Claus rally is often structured as an in-sample argument because the claim that stocks rise during a certain point in December, and historical price data come from the same dataset.
Structurally, such an analysis would only be out-of-sample if the discovery was made in a particular time period and the subsequent impact was tested across different sentiment regimes. That way, the analyst can better understand whether the Santa Claus rally actually works or if other exogenous factors were at play.
It’s at this point that you should realize that in-sample arguments are no better off than justifications for the Flying Spaghetti Monster (FSM). Just because you prayed to the FSM and you believe it helped you find your keys does not imply that the deity exists; you haven’t run out-of-sample tests to determine the other factors involved in you finding your keys.
Further, don’t be swayed by claims of “rigorous” fundamental analysis if the analysis doesn’t involve out-of-sample testing. Discussing additional valuation ratios, earnings trends, and insider transactions doesn’t make the underlying argument more effective if the core claim lacks out-of-sample testing.
Praying to the FSM hundreds of times a day does not increase the likelihood of its existence. Applying this same level of healthy skepticism could save investors a lot of avoidable market pain.
Evaluating AMZN’s Historical Prices
Quantitatively, over the past 10 weeks, AMZN stock has produced a 7-3-U sequence: seven up weeks, three down weeks, with an overall upward trend. From my in-sample dataset (which runs from January 2019 through July 2025), the 7-3-U sequence has materialized 49 times. What’s interesting is that, at the end of the following 10-week period, AMZN stock has moved up 36 times.
To be sure, we shouldn’t read too deeply into this one metric. However, on a statistically naive basis, the chance of upside over the next two months appears to be 73.5%.
Still, we shouldn’t rush into buying AMZN stock because the argument as it stands would be an in-sample assertion. To better ascertain whether the 7-3-U sequence is predictive, we would need to conduct out-of-sample tests.
To support the underlying bullish claim, I ran a test on the entire 2010s decade, which revealed that the 7-3-U sequence tends to signal an upward bias (though of a lesser magnitude than what would generally be expected as a baseline consideration given the sentiment regime at that time). This tells me that even with a shift in the sentiment regime, the sequence may be predictive.
However, the caveat in the out-of-sample data is that the signal is strongest in the first four weeks. Starting from the fifth week onward, the upside signal wanes. In other words, there could be some forward risk that the in-sample dataset isn’t picking up (which is another reason why statistical validation tests are really non-negotiable).
With the above intelligence in mind, the one trade that arguably makes the most sense is the 235/240 bull call spread expiring on October 3rd. This transaction involves buying the $235 call and simultaneously selling the $240 call, for a net debit paid of $220 (the maximum possible loss). Should AMZN stock rise through the short strike price of $240 at expiration, the maximum profit is $280, a payout of over 127%.
Also, keep in mind that the breakeven price is $237.20. That’s very reasonable considering that AMZN stock finished last week at $232.33. Of course, reasonability is subjective and doesn’t guarantee success. However, there is still an opportunity to milk some profits to the upside if you’re bullish on Amazon.
Is Amazon a Buy, Sell, or Hold?
Turning to Wall Street, AMZN stock carries a Strong Buy consensus rating based on 44 Buys, one Hold, and zero Sell ratings. The average AMZN stock price target is $264.13, implying 13.69% upside potential over the coming year.
Amazon Still Has Plenty Left in the Tank
Although it might not seem like it due to the extended strong run and tech sector weakness, AMZN stock still has legs left for intrepid traders. Statistically, it’s not just about observing a strength-begetting-strength dynamic but instead validating the signal beyond just the in-sample dataset. Ultimately, that’s what separates accurate analysis from clever hand-waving. I remain Bullish on AMZN stock, but to take advantage of the opportunities it offers, turning to the options market is prudent.