AMZN

These days, technology stocks come back as the talking point. Thanks to the lunatic price appreciation from GOOG, RIMM, AAPL, AMZN, BIDU, even newcomers like VMW. I wrote about GOOG, RIMM, AAPL and BIDU already. Want to use my new thinking of graph on AMZN this time.

Using the 4 weekly EMAs (20, 50, 100 and 200) as my new tool, let's went back to mid-April 2007. AMZN reported earnings there, it broke out significant from somewhere around $45 to over $60 in that week with a weekly volume of about 250 million shares traded, significantly higher than the usual volume of around 30 million shares a week.

Note that before that break out, the 4 EMAs were so tied up, after that break out the 4 EMAs of course started to diverge, with the shorter-time-EMA moved up faster. The next 2 to 3 weeks AMZN traded with volume closer to usual level, as well, less volatile, it traded within $60 to $65, a pretty small range of a famous technology stock.

AMZN by that time fulfilled many criteria that I would look for:

1. price break out with good earning expectation and much larger volume than usual
2. the price in the following week or so did not come back down to pre-break out level
3. volume went back to close to usual level and traded within much narrower range
4. all 4 EMAs became one higher than each other, while the 20-week EMA was not significantly higher than the 100 or 200-week EMAs

Point 1 is important because that means the price break out was appreciated by majority of investors. Point 2 is important because that means majority investors did not believe AMZN has much chance to go lower, so if they didn't get in now they probably would miss the boat. Point 3 is important because it means even after daytraders left the stock price did not fall, meaning there were really some serious longer term investors buying, the price appreciation was not just a hype. Point 4 is important because it means the stock still has a way before it becomes overbought.

With all these qualified criteria the stock continued to march up from around $63 all the way to a touch of $100. Note that along the way a significant weekly upward movement usually came with a higher than usual volume. A somewhat 50% return over about 5 months is not bad.

Okay now we turned the clock to last week, AMZN reported good earnings again but some experts said they worried a bit about AMZN's profit margin may shrink. It went up quite a lot before the earnings but then it dropped 12% after the earning report. No matter how hard it fell on the earning date it didn't go below the 20-week EMA. With the 20-week EMA is sitting at about $80 and the 200-week EMA sitting at around $50, I think this 20/200 ratio is still reasonable, so give AMZN about a week or two and if it didn't go below the 20-week EMA, I think price near the 20-week EMA is a good entry point for a longer term ride.

Just my guess.