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Monday, June 7, 2010

Chart of AMZN

sorry for delayed post today, my blogger service was having technical difficulties...

- According to news reports early this morning, Goldman Sachs added AMZN to its Conviction Buy List. I do not have a strong view on AMZN, but I thought it would be worthwhile to take a look at the technical picture of AMZN. Especially in light of the fact that Goldman put U.S. Steel (X) in its Conviction Buy List (reported by Briefing.com on morning of May 13 with previous day close of $55.03) and downgraded to a Buy (on June 4, Briefing.com, previous close $45.28) just days later. I guess their conviction was not that strong....
- What I immediately see is the wide, but rising channel lines with support around $119 level. If the overall market were in just a correction within a bull market, I would say now would be a great time to put on a Long trade at around the current price of $122 with stop/loss point at $114.0. Although I don't show it in this chart, the 200-day MA level is around $120. But is now the right time to BUY AMZN?
- SPY and QQQQ, ETFs that represent the S&P500 and the Nasdaq-100 indices closed at 105.49 and 44.27, respectively. These levels are right at the support levels of trading ranges that I described in previous posts. And I would not be surprised if we see a technical bounce this week. But the tug-of-war continues, between investors betting on a global economic downturn and others betting on continued recovery and relative health of the U.S. economy, but with the former showing greater strength.
- Below the surface, I see a pattern commonly used by hedge funds as a long/short strategy. They are selling aggressively Basic Materials such as FCX & X and other stocks that are negatively affected by the strong dollar, and buying U.S. domestic economy related stocks which are less affected by the strong dollar, such as CRM, SLG, HD, & perhaps AMZN, etc. This would explain why stocks in the former category are well under their 200-day moving average, while the latter category stocks are above their 200-day moving average.
- Given this observation, I believe that this long/short strategy will eventually reverse itself, meaning that the beaten down stocks like FCX & X would outperform in a market that stabilizes, and/or the relatively stable stocks will fall more rapidly in a market that continues to fall going forward.
- So going back to AMZN, I believe right now is not the right time to buy AMZN. But if Goldman is right about the fundamentals of this company, then perhaps after the July 4th holiday would be a better time to look at AMZN.

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