For the first time in ages, Amazon.com, Inc. (AMZN) appears to be destined for a bigger fall. It truly looks like the stock is lost amidst slow selling by institutions.
When Amazon recently reported earnings, the stock fell at first, but then quickly recovered to surge, making new, all-time highs. The earnings were again horrid, putting the P/E ratio for AMZN well north of 1000. In the past, the stock has always fought back to move sharply higher.
This time looks different.
Nothing But Short
First, the pop after earnings was pure short covering. Tons of traders shorted the stock into earnings only to have it fall slightly on the report. As they covered, the stock rose. Remember, when you cover a short, you're buying. As the stock popped, more shorts covered. By the end of the day, all the shorts that held just for earnings were out.
Now the stock could resume its normal course based on the earnings announcement. That normal course was down.
In My Opinion
Since that one-day pop on earnings, Amazon has done nothing but go lower. Even in an up market, the stock heads lower. At this point, all bounces can be shorted, in my opinion. I think the company is fantastic. I buy tons from Amazon.com. However, valuation makes no sense here.
The stock will head to $220 by the end of 2013.