Saturday, April 6, 2013

Good Read

Interesting read highlighting fundamentals investment mindsets vs not so explicit trading mindsets.  Knowing a truth doesn't mean a trade materialize in that truthful direction. No one sees markets in 20/20 vision.

The whole MLM aspect too was interesting in that such a strong fundamental view coming from Ackman failed to capture the many different types of people involved in the Herbalife business. His viewpoint comes from a very high level one track mindset.

I've been to a few Amway meetings, and they try to recruit like cults. The average person involved in distribution for an MLM most probability won't know or care what some Fat Cat Hedgie guy thinks or says. MLM's run on a faith type system and highlight the 1% Ackman highlights as successful, as a norm or something to aspire too. Reinforcement, and self-fulfilling yumminess.

Hope and faith are a powerful thing. Powerful enough to trump any short plays. The only question is how long can Ackman's billions last until the margin calls ring in...

Who knows, maybe he will get lucky like that time Robertson sat on a metals position for more than 5 years to claim he was "right" on the trade after it moved in the desired direction...

When you are well funded, its easier to sit on tougher positions.

Tuesday, April 2, 2013

AMZN Update April 2nd 2013 Update

Jan 24 my last comments on AMZN --> HERE

Jan 24:

  • High - 276.65
  • Low - 269.37
  • CLOSE -273.62
Technical perspective very interesting. Jan 24 candle indicative of failing bullish momentum, confirmed with next day failed gap above previous high with lack of volume confirmation (20/20 hindsight)

Followed by lovely volume confirmation of next few days correction. 

March 21 Close - 253.39

From Jan 24th Close to March 21st close = 7.4% correction from last call Jan 24th

10% correction from the close of 24th would = 246.25
15% correction from the close of 24th would = 232.57

If my analysis from the 24th is correct we will see 200day SMA support with price noise piercing below 200SMA changes. True support should hold with close above 200 SMA. 

If support can hold up trend still in tact = Buy in 240-250's range. Depending on how strong conviction is or trading style (waiting for confirmation on up swing, pre-emp buy in before move, scale in slowly pyramid up on confirmation). 


Above very linear analysis pure chart no comparison. 

Some interesting notes look at various time frames of AMZN vs $COMP and $SPX 


Volume on Jan 29th not so different from high volume seen in 2012 during other major corrections (mid sep - mid nov 2012). 

If volume from 24th is consistent with last years trend, bullish picture still very much in tact. However, watch short term price movements and support carefully to see if volume kills bullish scenario with much lower than expected price moves.


Looking at short term picture. Amazon significantly out performed SPX and COMP for the first two months. By the end of the third month prices converged already (would have made for interesting pairs trade scenario if one was aware). 

In terms of index performance, the first month COMP outperformed SPX slightly. By the end of the second month SPX caught up, and starting from the third month SPX started to greatly outperform COMP. 

The question is how indicative is the 30 day price performance for the short term going forward?

IF as I suspect long term trend is up, price convergence should be bullish. Prices should correct further to stated above and we can expect higher highs. Given the recent performance of SPX, COMP and AMZN would have to play catch up, and SPX lag a little. Perhaps there can be some fundamental evidence found for this? 

However, if longer term picture is more relevant, AMZN/COMP need to correct significantly relative to SPX performance from 2009.

From 2009:

  • AMZN prices are 300%+ higher
  • COMP prices are 40%+ higher
  • SPX prices are 20% higher

This being said though, more than often or not, human perception of technicals in such a long time frame to interpret something relevant is difficult as fundamentals become more important in such time frames. 

Though as perhaps is still true, post 2008 crisis, macro environment can trump fundamentals easily...


Another interesting signal may be all this M&A spike and big move in equities past year... Bubblicious or indicative? Perhaps for another post.

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