The K-tel rise/squeeze started on April 13 and broke on May 5. Amzn shot up on June 9th and has only run for three days:
June 9 - 45 to 51
June 10 - 51 to 56
June 11 - 55 to 62
We're up almost fifty percent in a week, almost all of it in the last three days. Dips function as bear traps - shorts think the peak has been reached and short more. If market players could drive K-Tel from 3 to 30 for announcing a web site, how high can they lift Amzn?
On the plus side, Amzn is a great company with a functional business. I'm not saying they'll ever make money, but they're doing a great job. Scared money is leaving companies whose profits will be hurt by weakness in Asia - to a company which doesn't have any profits to lose. Retail is supposed to be a safe bet in a downturn - people still need to eat and books is cheap entertainment. But again, the idea is that money will be trickling into a retail business, which it is not in this case. Finally, the internet is the future and Amzn has as a matter of record been an incredibly stable growth stock.
On the minus side, Asian stock markets are tanking, threatening lost profits and a spreading net of collapsing banks; the US market is making lower lows and lower highs, and the blind faith that some stocks will always go up is being shaken. After a huge bull run, there is lots of slush money in the market, ready for high-risk plays - the bubble. Amzn is this week's target - it's not really the fundamentals that matter; the players just have to pick a stock with a half plausible story. It's actually good if the story is silly, so shorts will pile on and then feed the flames as they scramble to cover.
On balance, I find it hard to argue, as some here on the thread do, that this rise is simply another stretch in Amzn's continual march to higher levels based on its business potential. The earnings are not only uncertain, but far into the future. Debt levels are high; the company could even crumble - I mean, we're talking about future uncertainty. So I opt for the speculative bubble scenario, which means that like most people on the thread I expect the stock to top off when some of the players leave and then retreat.
The big players may or may not be cooperating, and may suddenly bail, leaving others in the lurch and letting the shorts finally off the hook. That's a game among the longs and there's a lot of money at stake. We've had a very long straight run - Ktel's first run lasted from April 13 to April 20, then half the gains were given up before the second spurt. If we fit this pattern, we'll have another blowout tomorrow. I consider that pretty likely, but this isn't science - it's a question of who blinks first.
Kailash |
