Here’s the technical and fundamental picture on Amazon (AMZN). (September 12, 2016)
AMZN
Amazon ( NASDAQ:AMZN ). Here’s the deal: Over the weekend I posted some stocks, in the Weekend Update, that have some really good fundamental criteria in terms of growth. Then we went through and married the charts to those stocks and found the ones that are working. One of them that didn’t make the screen was Amazon ( NASDAQ:AMZN ). It’s important that I cover it. The reason this did not make the screen was just simply because they have not been making money for that long (as far as earnings). They have been socking it away hand over fist as far as revenues, but they haven’t really MADE a lot of money.
Their earnings per share though, over the last four quarters, have been accelerating DRAMATICALLY versus the same quarter the prior year; 118 percent earnings growth, 122 percent, 992, 837 percent. And their revenues have also been increasing. So the bottom line is, I can make a case fundamentally for this stock with respect to earnings and sales growth. I wouldn’t dream of it as far as just making it from a P/E standpoint; the price-earnings ratio is almost 200 so it’s pretty expensive relative to the S&P. But I want you to take a look at Amazon ( NASDAQ:AMZN ) from a long-term trend standpoint.
This will only take a second here. You can see this move here, and then we got a top. I can make a case here (watch me make it) for an inverse head and shoulder pattern right here. Okay, we have something to reverse, left shoulder, head, right shoulder. So we get this breakout at below 600.00 and then the stock starts taking off. You’ll note that the 50-day moving average has been holding all the way through. So guess what happened this morning? Lets see, the 50-day moving average, as of Friday the value of the 50-day moving average was 756 points. So where did this thing open up this morning? It opened at 756 points. So Friday’s value for the 50-day moving average was at 756, you can see it in the upper left-hand corner here, that box, 755.94, it was 756.00. So today the stock opened not at 756.00, but 757.35, close enough. But it traded down to the 50-day moving average and then promptly turned around, probably during the first minute of trading, basically. So it traded down to that level and then started moving up.
So here’s what I like about Amazon ( NASDAQ:AMZN ): First of all, the trend is actually sustainable. The slope is upward but it’s pretty flat. Second of all, the company doesn’t report earnings for a month and a half. Third, the 50-day moving average defines support. Fourth, we can place the stop, and it’s a trailing stop, right underneath the 50-day moving average, which gives us, if we are entering right now, a percent risk, we’ll say we buy right here, we put a stop at 749.70, below the lower Bollinger Band. We’re risking 3 percent on this trade to buy an uptrending stock that is as strong as Amazon’s ( NASDAQ:AMZN ).
So my point is, so your fundamental work so you know the company you are trading is growing or not. And then compare that with the chart. If they are both in sync you’ve got a possibility, not a sure thing, but you have got a possibility that you are going to make some money on this trade. So focus on your risk. Focus on the fundamentals. Above all focus on the technicals. If you can do that 3-point analysis I think you are going to be fine.
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