Here’s my trade on Amazon ($AMZN) (October 30, 2020)
AMZN
This market is so choppy I don’t really see anything to do; so let’s talk about that a little bit. I am looking at Amazon ( NASDAQ: AMZN ) and I don’t see anything to do on this stock either.
I saw on CNBC today a couple talking heads noting that Amazon ( NASDAQ: AMZN ) is the best positioned company for the holidays, for shopping, for COVID, the whole bit. Like we are all under martial law, we can’t go out and so we are buying everything on Amazon ( NASDAQ: AMZN ), I am.
I bought a little guitar, a little switch, I forget what you call it; I lost a little knob on my telecaster. I went to Amazon ( NASDAQ: AMZN ), $6.00, free delivery, I think I get it tonight. I am happy, happy, joy, joy. Everybody is buying everything on Amazon ( NASDAQ: AMZN ), so that’s an awesome thing. You have got to get into Amazon ( NASDAQ: AMZN ).
But then I look at the chart and this is what I see: I see a nice little consolidation pattern here. The stock squirted out the top, printed a high here, okay, we get that. The stock pulls back, oh crap. It fell through the last little consolidation pattern here. It kept going; went down here, broke through the 50. Well, that’s not a good thing. But then it finally comes back up above the 50. Yippee-ki-yay, now I am going to make all of this money; but instead, that doesn’t happen.
Instead, the stock makes a lower high. And then since then it has traded off, got back above the 50, and now it’s below it on volume and it’s on earnings. Now remember, this is the company that is just perfectly positioned for the Chinese flu. It is perfectly positioned; Santa Claus is canceled this year because he can’t find a mask for all the reindeer. If Rudolph has got a mask over his nose, how the heck are you going to see where you are going there? So Christmas is done.
And that means everybody, whatever shopping they are going to have, they are going to do at Amazon ( NASDAQ: AMZN ). They are not going to break into Walmart and Target and riot to get those big TVs, so Amazon ( NASDAQ: AMZN ) is the place to go. Why isn’t the stock behaving? Why aren’t we seeing that in the stock? I will tell you why; because maybe it’s all factored in. What do you think about that?
At some point earlier this year, the stock was down there, this puppy doubled, more than doubled, in not too long at all, in less than 6 months. Okay, that’s a big move for a monster company like Amazon ( NASDAQ: AMZN ), this is a huge move. So what I am saying is, at some point the thesis for owning a stock is so obvious that large money managers don’t look at it as, oh, that’s a dog stock.
Instead, they say all right, this is pretty fairly valued, sure glad we got in at $1,000.00 or whatever, that’s great, but it’s fairly valued now. At the very least we are not going to buy any more. In fact, I know, let’s go ahead and lighten up on our Amazon ( NASDAQ: AMZN ) position because the way the market is looking now we may get some great opportunities in energy or financials or whatever they are looking at.
But what does happen is, at some point a stock gets too popular and it’s popular for a reason. Amazon ( NASDAQ: AMZN ), come on man, it’s Amazon ( NASDAQ: AMZN ), it’s great. But are the big money managers still going to be hanging on to this? In fact, are they going to be buying more? Because it takes more buying pressure to push a stock up. At this point, I can tell you without a doubt, I can promise you that they are not buying Amazon ( NASDAQ: AMZN ). How do I know? Just by the price, by the price action. This isn’t under accumulation this is under distribution.
Stocks aren’t accumulated in the upper right part of the chart; they are accumulated in the lower right part of the chart, down here. And so this is a stock that is really toppy to me. Now, does that mean that I would sell Amazon ( NASDAQ: AMZN ) or I would short Amazon ( NASDAQ: AMZN )? Well, I would sell it if I owned it but I definitely wouldn’t short it because it’s Amazon ( NASDAQ: AMZN ). And Lex Luthor is the richest guy in the world, he has an evil plan, so I wouldn’t be shorting it.
But I wouldn’t buy it here because there is no money in it. There is literally no money in this trade right now and I will tell you why. This is the trading box, from this last high to the low here. This stock is in a range; let’s move it to this one. The stock is not yet down to a point where you could buy it for a bounce trade and there is certainly nothing here that indicates that the stock is going to break out and continue higher.
So my point is if you are looking at Amazon ( NASDAQ: AMZN ) do just that. Look, but don’t buy it. This is the most obvious trade in the world; Amazon ( NASDAQ: AMZN ) is down over 5 percent today. Somebody on CNBC will say, oh, this is a once in a lifetime opportunity to buy it. Trust me, it’s not. Let this stock kind of wiggle around. Hopefully, it will tighten up and maybe give you a good entry, a good trading opportunity. But honestly, as I see this stock, this stock can trade around for 6 months before it gives you a potential buying opportunity. That’s the way I see it.
And also note this, it totally depends on your time frame. If you are a very, very short-term swing trader you may buy it on Monday, ride it up 2 or 3 percent, or 5 or 10 percent, I don’t know. You may buy it on Monday and then hold it for a week or so and then sell it and say, Fitzpatrick doesn’t know what he’s talking about.. You may be right on that but I will just say this, I am talking about for a longer-term trade. I am just saying this is not a good entry for Amazon ( NASDAQ: AMZN ) but it is an awesome stock to own.
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