Ok. Amazon is undoubtly a great multinational and a blue chip/safe investment for everybody. It is familiar and with great profit margins, great overall financials so it would be logical to allocate a large chunk of your portfolio into it.
But, if you look at the overall macro of the stock market and you -like me- smell blood in the water and a recession coming, then this would be one of the stocks to short. Why? Because there is a lot of potential for capitulation: a lot of leveraged long positions, a lot of retail as well as intitutions that would never expect AMZN to fall 50% or more (as it has previously proven capable of doing during recessions).
Not to mention that this had been a growth stock up until 2020 with a price that's massively unrepresentative of the real value of the company (but that's a problem that virtually every stock has nowadays) which leads me to the next piece of my analysis: technicals.
I like to keep TA very simple and on a daily timeframe because that's how it gains the most predictive power.
You can see on the daily chart that AMZN has been trading range bound from September of 2020 to January of 2022 after a great run up. This means that it didn't go up in the face of the flaming hot inflation of 2021.
I believe 2021 has been a whole year of DISTRIBUTION and since the January mini-crash the stock has seen a new low, lower than the previous lows when it was trading range bound.
Also, the stock is now trading below both 200 and 50 Moving Averages and the 50 has crossed down the 200, which is a bearish sign. Price is coming back to test the 50 and that's why i believe this is the right time to go short.
But, if you look at the overall macro of the stock market and you -like me- smell blood in the water and a recession coming, then this would be one of the stocks to short. Why? Because there is a lot of potential for capitulation: a lot of leveraged long positions, a lot of retail as well as intitutions that would never expect AMZN to fall 50% or more (as it has previously proven capable of doing during recessions).
Not to mention that this had been a growth stock up until 2020 with a price that's massively unrepresentative of the real value of the company (but that's a problem that virtually every stock has nowadays) which leads me to the next piece of my analysis: technicals.
I like to keep TA very simple and on a daily timeframe because that's how it gains the most predictive power.
You can see on the daily chart that AMZN has been trading range bound from September of 2020 to January of 2022 after a great run up. This means that it didn't go up in the face of the flaming hot inflation of 2021.
I believe 2021 has been a whole year of DISTRIBUTION and since the January mini-crash the stock has seen a new low, lower than the previous lows when it was trading range bound.
Also, the stock is now trading below both 200 and 50 Moving Averages and the 50 has crossed down the 200, which is a bearish sign. Price is coming back to test the 50 and that's why i believe this is the right time to go short.
Comment:
TP some days ago, forgot to update