An Overstretched Rubber Band?

Ah, the rubber band. Simple in concept, simple in operation.

The power that it absorbs as it expands can be put to beneficial uses:


(iStock photo)

But it doesn't like to remain stretched. It can suddenly snap back and quickly reclaim its ‘relaxed' state, possibly causing significant injury in a short amount of time to anyone or anything in its path.

After yesterday's close, Amazon.com (AMZN) reported Q2 earnings (of only $0.19 a share) that blew away expectations on this almost-100-billion-in-sales company. The thing is, Amazon has not been real good at showing a profit, considering how long it has been in business (20 years):

Now I know that Amazon is in a growth phase and all that. They are intentionally running in loss mode because they are building new lines of business. Of course. That justifies a euphoric reaction in the stock price.

Amazon is up 15% in the aftermarket, after announcing these ‘blowout' earnings.

So this morning (7/24/2015), AMZN is likely to open around 565, compared to Thursday's close of 482.18. On the weekly chart, once AMZN opens, AMZN will be quite ‘stretched' from the 200-week moving average. Let's take a look at the weekly chart, in logarithmic scale mode:

Amazon's stock is like a rubber band. In late 2009 the stock retreated 27.5% after the big stretch. In 2011, it was a 32.3% retreat. In early 2014, it retreated 30.3%.

Sooner or later it will ‘snap back' from its current highs. Are you going to be in the way?


(Harry Reid after ‘resistance band injury')

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

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