Seeking Alpha

Preston Cheng's  Instablog

Preston Cheng
Send Message
SMU Cox School of Business Graduate - Finance Major. My analysis that I base investment decisions on is a balance between technical and fundamental analysis. I have been investing and trading for the last 8 years.
My blog:
Synthesis
  • Amazon.com: A Technical Look (11.22.12) 4 comments
    Nov 23, 2012 11:02 AM | about stocks: AMZN

    There are a lot of critics out there who look at a company like (Amazon.com (AMZN)) and wonder how it is above $200.00 per share. They see a company with low margins and a huge PE. When I look at Amazon I see:

    • One of the few survivors of the dot com crash
    • A market disruptor who is unafraid to diversify its business
    • Jeff Bezos, one of the best CEO's alive today
    • A company that has rewarded long-term shareholders with very strong returns over the years (see below)

    (click to enlarge)

    Here is a lesson from one of the most successful investors, William O' Neal:

    Valuation Does not Matter

    The most successful stocks from 1880 to the present show that, contrary to most investors' beliefs, P/E ratios were not a relevant factor in price movement and have very little to do with whether a stock should be bought or sold.

    Technical Analysis Matters

    Learn to read charts and recognize proper bases and exact buy points. Use daily and weekly charts to materially improve your stock selection and timing.

    With respect to the quotes above, I will present the charts of Amazon.com as of (11.22.12), and where I believe it could be going. I am bullish on Amazon going into the New Year.

    (click to enlarge)

    The Breakdown

    • AMZN is back in the Long-Term Ascending Channel
    • AMZN has broken the Short-Term Descending Channel, on above average volume, with good follow through the next day.
    • AMZN has bounced off its 200 Day Moving Average price of $220
    • AMZN is about to challenge the 100 Day Moving Average price of $238, for the 3rd time
    • AMZN has recently undergone a price correction of around 17%

    Target Price for December $250-$257

    Some events that could materially affect the forecast

    • Black Friday and Cyber Monday shopping fails to meet expectations
    • The Cease-Fire in the Gaza is broken
    • Consumer Confidence reports for November fail to meet expectation
    • The Fiscal Cliff is not resolved

    Disclosure: I am long AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: AMZN
Back To Preston Cheng's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (4)
Track new comments
  • I, personally, do not believe in technicals. It's like looking at tea leaves. PE values also work upto a certain point and they, like technicals, are backward-looking figures than forward-looking figures. This report falls short in many ways especially when it comes to justifying positive forward looking sentiment on AMZN.
    I would say the positives come from the Kindle device and amazon web service and the investors took the stock a little too far with the price at such huge P/E values.
    What's more important is that AMZN is NOT a dividend paying stock. With a non dividend paying stock, it's very hard to justify the stock's intrinsic value with CAPM. In a case like this, analysts say "trading on technicals", I call them gambling with tea leaves.
    You should study up on CFA before posting something like this.
    28 Nov 2012, 02:48 AM Reply Like
  • Author’s reply » I appreciate the feedback, the report is purely a technical one. It explains all the aspects of the chart as of 11.22.12. At that point in time, I saw a trade opportunity, that I thought I would share with my followers and other people interested AMZN.
    Since the post, Amzn has gone up $6.00, and remains on target to $250-257 in December. Whether you agree with the analysis or not, people could have profited from the post, which is all I wanted.
    28 Nov 2012, 11:56 AM Reply Like
  • Author’s reply » Target of $250 reached! I'd raise stops to $250, and hold to see if we can hit the upper range of the forecast at $257
    29 Nov 2012, 02:55 PM Reply Like
  • Author’s reply » AMZN is showing some weakness against the $255 level, keep an eye on this stock tomorrow and see how it acts, be ready to take profits.
    6 Dec 2012, 04:10 PM Reply Like
Full index of posts »
Latest Followers

Latest Comments


Most Commented
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.