Karpel’s Corner: Amazon and the January Effect

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

Back-to-school sales have come and gone. Now it is getting to be that time of year when we set our sights on the January Effect and look at the sectors most impacted by holiday spending.

Today, I want to look at one stock that is the big dog that time of year, Amazon ($AMZN). On paper, Amazon just does not make sense: the P/E is negative, making money seems to be optional. But, technically, it has been able to defy gravity, at least until 2014. 

For the first time in over 7 years, the price of $AMZN has been underperforming, not only the broad market ($SPY) but also the other retailers ($XRT) and discretionary names ($XLY). As a mater of fact, the stock peaked last year in October and has done nothing but underperform.

We have seen rally attempts in the stock in July and September, which is why we have given $AZMN a score of 9 on the 50-day short-term trend. But the long-term score of 2 gives a bearish outlook into the next 12 months. Either the Elepahnt is let out of the corner, breaking above $360, or support will be tested at $312. If it breaks, that would be negative for the stock. 

See you next time at the Corner!