Amazon.com Is “Prime” For Shorting

I have only just recently found your work through Craig Hemke of TF Metals, but I have been reading your reports on Amazon and decided to take the plunge and buy your full report – wow!  It is a great report, thank you.

Now I have found your work, I will keep checking your website to keep up to date with your reports.    – “Alex from the UK,”  who purchased my Amazon dot Con report

Amazon.com announced Wednesday that is was finally discontinuing its Fire Phone, which failed miserably.  Only the insider beancounters and Jeff Bezos know how much AMZN wasted on this product.

Consistent with its business plan, which spends enormous amounts of money in order to lose money every quarter (using true GAAP accounting, not Bezos “make it up” accounting rules) and to continue burning through the cash it raises from the bond and equity markets,   AMZN announced that it will roll out a $50 tablet with a 6-inch screen in time for the holiday season.

AMZN already has a table product on the market that, like the Fire Phone before it, is failing to generate consumer interest.  It’s been estimated that AMZN’s share of the tablet market is less than 1%.   While I expect the new 6-inch screen tablet to fall flat on its face, I would love to see a breakout of the amount of money AMZN spent developing the product.

But let’s look at a couple charts of AMZN’s stock – click graphs to enlarge:

AMZN1As I pointed out in previous post, AMZN can’t seem to push through the $530 price level (yellow line in the upper right).  It is likely that big hedge fund with a large position in AMZN is distributing the stock to hungry retail momentum traders. At some point the hedge funds with overweightings in AMZN will turn into dumpers rather than distributors.  AMZN reports its latest quarter on October 22.   “Street” consensus is for a loss of $0.12.  Last year when AMZN reported its Q3, the stock gave short-sellers a nice, quick ride lower.  I believe this year will repeat last year, as we already know that retail sales overall were negative in August and will likely be weak in September.

The next graph is a 5-yr daily of AMZN with 50 and 200 day moving averages. The 200 dma often acts as a AMZN2gravitational force which pulls the 50 dma toward the 200 dma whenever the 50 dma becomes significantly “dislocated” from its 200 dma in either direction.  In this case, the 50 dma is currently 23% above the 200 dma. The last time this degree of separation occurred, the stock rewarded short-sellers with a quick $100 drop for a 25% gain.

AMZN3Finally, lets look at today’s intra-day action in AMZN, which I believe was bearish.  The entire stock market shot straight up at today’s open (Wed, Sept 9). But at lunchtime, when the stock market reversed course and headed lower, AMZN was hit even harder.  For the day, the SPX closed 1.7% below its high of the day, but AMZN closed down 2.4% from its intra-day high.   In the context of the two graphs/analysis above, I believe this is a bearish omen for AMZN’s stock.  In fact, once again AMZN stalled out at $530 and sold off quickly from there.

To be sure, if the Fed is successful in propping the stock market up and pushing it higher, AMZN will move higher with the overall market.  However, AMZN’s current valuation is now just silly.  The stock trades at over 77x “forward” earnings.  Of course there’s one problem with this metric:   AMZN has lost money in two of the last three years, is losing money on trailing twelve month basis and is projected to lose money in this current quarter.  So what makes the Wall Street prognosticators think that AMZN will make any money over the next twelve months?

My report shows why AMZN is absurdly overvalued and how the patient investor can make a lot of money shorting AMZN.  The report includes a section on using options.  Several readers who have purchased this report in the last six weeks have reported back to me some impressive gains using puts:    AMANZON dot CON.

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One thought on “Amazon.com Is “Prime” For Shorting

  1. Now we just have to wait until the big Wall Street players assisted by CNBC and Bloomberg have their shortpositions in place and that the last suckers are lured in on the long side
    Let the scalping begin and please close the elevator door

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