A look at some of the Technical Analysis, TA (with a LOT of narrative stuff thrown in - you might want to grab a soft drink before sitting down to this ; -):
Hmmm . . . very interesting story about to unfold, IMO. Many may be scratching their heads recently wondering, "how can this dog keep going up?" Here are my guesses of what is driving it: 1] the stock was ready for a normal "technical rebound" following a short-term period of over-selling. This has practically NOTHING to do with the longer-term trends or fundamentals or anything that makes sense except the give and take of buyers and sellers (and Xed by shorting v. covering). Very few stocks go up or down on a straight line let alone particularly volatile ones like Amazon that are in the hot stock sector of the day. 2] The dynamics of AMZN, as many have come to understand, is driven by the supply and demand equation as stock and buyers come into the market. Stock comes into play both because of new float and because of short selling - because of the very high degree of short selling, the stock can make irrational moves to the upside. Because the internet is such a hot topic in all the media and around the water coolers and coffee tables of potential investors, new buyers can enter the market for the stock regardless of any arguments for or against the company's plans, fundamentals, TA or anything else. IMO, the internet itself is a major factor in this supply v. demand equation. Millions of new users are coming onto the internet or becoming aware of things such as on-line investing, chat rooms (like SI & TMF) and how fun and easy it is to send e-mails to others telling them about the great fortune they have made investing in YHOO! or NZMA. Take the current situation. Last week the Starr report and "Clinton Tapes" made their world-wide debut on the internet. A few million people saw at least parts of these on the net and many, many more heard about it. This sends the message that "WOW, the Internet really is important. Maybe there is something to investing in inet companies" or at least increases the awareness of the Internet to millions more people. Then there is the planned promotion of the sector that surrounds the release of eBay and other large IPOs. Yahoo! conveniently announced that margins are expected to expand nominally above analysts expectations. Although YHOO is in an almost unique position to extract margin (some of it coming from Amazongonenutty.com), this was taken as a sign for health in the industry and, in some insane way, as an indication that values really are justified. I don't think there is a coincidence that the DELL/Excite/AT&T announcement was made this week. And now the BOOK (B & N) IPO is scheduled to go forward by the end of the month (and one other biggie I can't think of right now). The sum of these events has led to the pumping of a fresh infusion of investors (suckers?) into the Internet bubble.
OK, now that some understanding of the climate has been discussed, all just my opinions of course - feel free to doubt any or all of it, lets look at some TA (no, were not talking about scenes from the relationship between Monica and Bill):
The stochastic indicator has moved up to over the upper 80 band. Although it could hang around that lofty level for a while, IMO it will not. Why not? Because of the weakness shown in other indicators combined with the thinking that the new wave of buyers caused by the factors discussed above will diminish shortly
The PDM/MDM divergence indicators look like much or all of over-sold condition of the previous couple of weeks has been dissipated.
Here's the interesting one that confirms my suspicions about the strength and "quality" of this rally: The Money Flow Oscillator has remained in negative (red) territory throughout the recent run up. This is unusual. Typically when a stock has made this much of what appears on the surface to be a strong rally, the MF indicator turns strongly positive. But this indicator hasn't budged from the red that began when the stock first began selling off big time on August 28th. Here's a brief explanation of this indicator: "Chaikin's formula assigns positive buying power to an issue when it closes in the top half of its range, and selling power when it closes in the bottom of its range. Values above 0 tend to indicate accumulation, and below 0 indicate distribution." What this tends to indicate, particularly when long trends are established, is the accumulation or distribution of stock, often among knowledgeable investors or insiders: "pump the stock up, sell it off." might be the motto of the insiders and investment bankers-promoters. Hmmm, I'm thinking here, . . . if my thinking on this stock makes sense, that's what I'd hope to see from this indicator.
Now let's look at the MACD. This is a very useful indicator for recognizing growing strength or weakness that often shows up ahead of major moves in the stock. The general rule for this indicator is to look for patterns in which it repeatedly confirms or dispels a trend in the chart of the stock. Simply put, if the MACD fails to make new highs while the stock is making new highs, then the strength of the support in the stock is weakening. On the other side, if the MACD is moving up more than is indicated by the price movement (chart) of the stock, then strength is building.
You usually want to combine the separate indicators to develop an overall understanding, or theory, of the stock. OK, so what's MACD say about NZMA? Plenty, IMO - particularly when corroborated with the other indicators and the understanding of the "buy v. sell bubble dynamics" discussed above. Again, use your own thoughts and observations to dispute any of mine - form your own opinions, after all it's your money. I first started short selling calls on AMZN when it approached the 110 level back in early July. The MACD indicator had reached the rarified atmosphere seldom seen by mere mortal stocks (or those not transported to Bizarro World), The Stochastic and other indicators had all lined up to shout OVERBOUGHT. At that point I could care less about "those stinkin' fundermentals". The stock had just gone up far too far and far too quick and the panic among shorts and the glee of longs was also wonderfully compelling. Since that initial attempt to move up past the 140 level, maybe toward the 180 12 month targets set by pimping brokerage anals, the MACD indicator has trended solidly downward despite the three attempts to move up. "Three strikes [of the MACD indicator] and your out" is one of the "classic" indicators of a weakening stock (can also be used very effectively for sector analysis). Well folks, the MACD for NZMA has failed to move up on each attempt and now is languishing bellow the zero crossing line despite the basing period at the 70-80 level. This puppy is sick.
So what if Internet stocks remain hot and NZMA moves up to 120? With new IPOs due to come out and hundreds of millions to be made by the investment industry and insiders, and with the internet being the hub of conversation about release of controversial information the hype factor shouldn't be ignored in the short-term. So much the better, IMO. The indicators will likely look that much better, more float will be pumped into the inets, and new IPOs will compete for shareholders money, and the collapse in these stocks, particularly ones with little prospects for earnings, will have that much further to fall.
Opportunity of a lifetime? Or at least one of them, IMO. |
