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Thursday, February 28, 2008 

Stocks to watch tomorrow - JNPR, VOL , BRCM, AMZN

Chart courtesy of stockcharts

AMZN - The technical chart above shows weakness as the stock is trading below major moving averages ( 20, 50, 200 ), and if you look closely, you can see that its 50-day moving average is poised to slip under the 200-day level (A Dead Cross is created when shorter moving average crosses below a longer moving average. This is generally considered a bearish signal ). Amazon is trading at 63Xs 2007 earnings, 46Xs consensus 2008 earnings, 27Xs 2007 free cash flow. With a recession coming, and a weaker consumer, stock price could be well affected. Technically, stock is in a short term Bearish mode. Plus, insider transcations are very active, Jeff Bezos sold 1.85 million shares of Amazon.com in mid-February for $73.21.

Chart courtesy of stockcharts

BRCM - Stock starts showing ‘buy' signals again. However after recent decline in share price, a good entry point will be only in a break of its 20-day moving average at $20.80 on heavy volume. Stay tuned on her.

Chart courtesy of stockcharts

VOL - The stock closed above its 200-day moving average for the first time since March of 2007, with heavy volume. Although the stock didn't perform well last year, we start to see now some signals of rebound as the technical chart shows positive momentum is back, and with MACD back above 0. In addition the 20-day moving average recently crossed on top over 200 day moving average which is a very positive sign. Let's keep an eye on her.

Chart courtesy of stockcharts

JNPR - Stock confirmed my previous analyze, breaking today the neckline of the Inverted Head & Shoulders pattern. At this point it seems that we have room for $1 run before next resistance at $30.30.

Disclaimer : Trading stocks involves risk, this information should not be viewed as trading recommendations.The charts provided here are not meant for investment purposes and only serve as technical examples.

That's All. Have a great evening !!!


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The Amazon stock will soon fall...sharply..the chart is very ugly for Bulls.

Amazon grew 35% currency adjusted in 2007 with $14.8 billion in revenue.
62% of sales is in the media business - books, music, movies, and software
35% of sales is in the electronics and general merchandise business - computers, consumer electronics, toys, home appliances, etc.

1) Law of large numbers. Analysts expect sales to increase another 30% in 2008. In the last recession 2000-2002, Amazon in its worst calendar year went from triple digit growth to a mid-teens percentage year over year. That was on a much smaller revenue base. Given the housing issues where millions of people are going to lose their homes and how this recession is more likely to hurt people's pocketbooks, it seems likely 30% growth on a $14.8 billion number may easily come down hard.

2) The businesses they are in. Books & Music - Barnes and Nobles and Borders results have been lackluster with negative same-store sales and guidance cuts.

Electronics - Best Buy just brought down numbers and Circuit City has been an utter disaster.

Home Goods - Home Depot and Lowes keep cutting numbers. Sears keeps missing sales numbers and earnings by a mile. Even Target is missing numbers with weak same-store sales.

How likely when all the leaders of the sectors Amazon is selling in are starting to miss horrendously, will Amazon grow at 30% in 2008, the same percentage as heady 2007 when there was lots of tailwinds on a MUCH larger revenue base? Not likely.

3) Insider and firm selling. One of the red flags I always like to look at when companies fundamentals are deteriorating is insider selling.

Jeff Bezos just sold 1.85 million shares of Amazon.com in mid-February for $73.21. That's $135 million. Bulls say that's a small percentage of his total holdings (99.3 million shares). However this is the first time he sold since 2004 when he only sold 50,000 shares. I don't care what you say. $135 million stock sale when he hasn't sold any significant stake in years is a big red flag. Moreover you are seeing a cascade of other executives selling $50,000 here and $500,000 there in recent weeks.

4) Valuation. Amazon is trading at 63Xs 2007 earnings. 46Xs consensus 2008 earnings. 27Xs 2007 Free cash flow. It's not cheap. It they don't hit heady 30% growth estimates for 2008, there is a lot more downside.

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  • I'm a 48 year old Independent Trader using proprietary technical analysis with more than 20 years experience of investing in the US stock markets. I started this blog in 2006 simply as a way to share my thoughts about capital, risk management, and trading. My blog contains only my personal opinion and is provided for informational purposes only.

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