Amazon.com, Inc. (NASDAQ:AMZN) reported earnings last Thursday evening. They were nothing to write home about. The stock initially sold off after-hours, then crept higher the following day, pushing to a new all time high of $313.62. Many people think this stock can never go down because even on poor earnings, the stock still went higher.
The reason for the stock moving higher the day after earnings had nothing to do with bad or good earnings. It had to do with short covering following the lack of price drop on earnings. Tons of traders had bet the stock would collapse sharply lower on earnings. After reporting, the stock was only down one-percent or so. The same traders that shorted it prior to earnings, covered the following day. This forced the stock price up.
Notice how the last few days the stock has started to decline again. This is because those shorts have already covered and there are no real buyers left. If the stock can eclipse 100% of the move up from earnings, the top is in and shorts can be taken at will above $300.00. Yes, it is that simple. Cheers!