Okay boys, let's not quarrel anymore. Even though some say TA is useless on a stock like AMZN, old habits are hard to break, so I've done a little analysis on AMZN, starting from the break-out point on June 8th.
From that point, I've charted the 5 day EMA, the 10 day EMA, and the 15 day EMA. If you draw a line along the lower side of the wavey 5 day EMA, we see that during this run up in June, AMZN hasn't closed below this 5 day ema more than a point or so, and that only one time. Other than that once, it's floated above the 5 day ema, which indicates a very powerful stock. The price gains of course reflect this. Yet only three days ago the 5 day ema was at 98, and right now it sits at about 110. Yet the stock is at 124. On the other two occassions this month when the stock made another three to four day advance, dragging the 5 day ema upwards to almost a 45-degree angle, the stock always fell back, then resumed the advance. So we have a pretty good idea of where the 5 day ema is.
Senario #1: Now if the stock follows through with more gains on Mon thru Wed of next week, the "new" slope of the 5 day ema will put us close to 136, ñ 1 point by Wednesday.
The slope of the 5 day ema for all of June however, shows that by July 17th (options expiry), ten trading days away, if the stock sticks to the 5 day ema, we'll be at 133. That's only 9 points away from where we are now. Will AMZN momentum traders be satisfied with a stock that can may "only" make an average of 9/10 of a point per day for the next two weeks? Time will tell of course.
I personally think that the 140 area, ñ a few points is the peak for AMZN in this tech rally cycle, if it even makes it there. If insiders and other big sellers begin dumping this pup prior to then, then we may not make 140.
Extension of senario #1: If we keep rallying early next week to hit that 136 number or thereabouts, then I think the stock will almost certainly fall back to the slope of the original 5 day ema, which would will be about 124, or where we are now. Key point: At that point, the *new* 5 day EMA will be broken. This is a bad sign, technically speaking for a stock like this. If TA doesn't work on this stock, then from there it could rest, then make a run for 133-140 area by July options expiry on July 17th. But it is curious that the stock has thus far not violated the 5 day EMA, so I wouldn't count on this stock resting then running to 133-140.
The other senario, which is probaby more likely give the brief history of this June AMZN rally, is that the stock will fall back by Tuesday or Wednesday to the 5 day ema, which will then be about 114. Since that's 10 points lower than we are now, that *may* break this move by panicking big holders into dumping, making the senario of sticking to the 5 day EMA to end on July 17th at 133-140 unachievable. But that's a really tough call to know what big holders are thinking. Right now, July put and call options are priced so that it doesn't make any sense to buy either calls or puts, whether AMZN is at 125 or 140. Either way, a person would be fortunate just to get their capital back. I'm pretty much giving up on my puts being worth anything, but I can't see putting fresh capital at risk at this point. So I'll just wait and see where we are nearer to July 17th. If we're in the 135 to 140 area, I'll probably buy some Aug or Oct puts, or both.
In any case, I don't see how this stock can be higher than 135 to 140 ten days from now, unless this sector goes even more totally berserk, with a mother of all mother of all mothers of short squeezes plus more internet manic buying. |
