A reader has asked about Amazon (NASDAQ:AMZN). One of the lines of research I'm pursuing is a combination of the Relative Dollar Volume flow data for individual stocks and the historical trading patterns associated with those stocks. The idea is that you would buy (or sell) when you have a historical edge and when dollar volume flows support that edge.
Money flow has absolutely exploded in AMZN during its recent rise. Even prior to the strength of the last two sessions, flows were positive during 11 out of 13 sessions. The current strength represents multiyear highs and a break out of a price range going back to the beginning of 2005.
Since 2004, however, (N = 814 trading days) strength in AMZN has not led to further strength. When AMZN has been up more than 8% over a 20-day period (N = 182), the next 20 days in AMZN have averaged a loss of -4.02% (60 up, 122 down). By contrast, across all other occasions (N = 632), AMZN has averaged a 20-day gain of 1.41% (339 up, 293 down).
This time could indeed be different, as AMZN may have begun a meaningful trending move. My preference, however, is to wait to see how volume and money flows behave on pullbacks before chasing highs against recent historical odds.