3SOF

I have been watching AMZN behavior lately and I have seen that stock is having a bit of  trouible in breaking its current consolidation pattern.


I think that the stock is due for a pullback for 5 main reasons:
1) Has not been able to break its consolidatiopn pattern.
2) Volume has been big of late but it is likely to drop after option expiration which was this past Friday
3) If one is looking at its technicals one would see that most TA are signaling an overbought stock. Inidicators such AS MACD, RSI, TRIX, Slow Stochastic among others are signlaing a pull back soon.
4) Although the company did report goof earnings much of the growth reported was due to the opening of new mp3 store which is a market that is already saturated and is not likey to give the same reults next quarter as Ebay and other online retailers begin to provide the same type of service at a better rate.
5) Their main source of revenue is book selling. If compared to other online sites one could see that there isnt really any cut costs involved and the market is not one where further growth can be sustained.
6) Insiders have been selling stock of late
7) Growth was big this quarter but it looks like people are getting to excited over next quarterr and as a result expectation begin to rise making it tougher for them just to meet. 
Much of the growth was not organic(self-sustained growth) but from other sources that are not going to be there for next quarter and the rest of the year.
9) Valuation wise its expensive: Trading at a 107 multiple witha growth rate of 24%(8% which is organic growth) the stock is expnisve and overvalued.
10) with a market pullback lily to come soon, the stock is sure to trade near its fair value of $57 or so.

The best way to trade it is to go IM as to be protected but dont go out to much in term of time. Playing the volatility is key in this situation.

Hey Samantha,

First off I would like to  thank you for such kind comments.
As I mentioned earlier, fertilizer stocks have experienced a surplus of money flow into them.  Most of thse stocks have reported dynamite earnings with growth rates way above analysts expectations. As you can imagine these stocks  have been rewarded and it is reflected in their PPS.

What has really drawn people's attention to this sector is the fact that these companies have been able to grow organically which really shows the strong deamand that sector is currently facing.

Fertlizer stocks have been rewarded for numerous reasons but the top 5 reasons are:
1) High demand for corn, soy beans and other commodities have given fertlizer companies an increase in demand and created shortage in supply which obviously translates to a higherand unexpected PPS.
2) The industries average growth rate before this boom was at 3.2%.  The current growth rate for the sector is at 14.5% and yet the valuations for most companies are cheap.
3) Valautions for these companies are way undervalued and big fund managers are recognizing it thus pouring in hefty amount of money into them.
4) Hot money(Momentum money) has been in this sector for a while now and it is likely to ocntniue as companies begin to acquire and merge with other companies in the same sector.
5) Right now the sector is growing at a 14.5% growth rate. It is expectd that the secot wiil grow near 19.7% a year from now with a multuiple of 24 which is reltively cheap if compared to other sectors of the market.

You asked which calls I am in. I got in the Jan 08 75 calls. I usually swing trade but I like this companies overall business model and therefore chose to invest on it. Like I said I can really see this company hitting par ($100) by years end.

Im looking at some Bunge calls 08 (LEAPS).

As we all know fertlizer stocks have been on fire of late but BG has lagged the group. It is near ending its consolidation period. Sitting near support at $71 with a double digit growth rate YOY and a surplus in cahs flow, the stock is primed to have a run to par by years end.

Technical Standpoint:
MACD near bottoming out and ready to converge bullish
RSI at 30(oversold)
Slow stochastic bottoming at 30 andmomentum looks to be catching up with the PPS.

NYX looks very intresting at these levels. I am an option strategist and NYX looks primed to run but not just yet.

There will be a pull back coming soon and most NYX calls will be cheaper by then. Right now there are selling for a realitve high premium compared to its peers and time decay is not on your side.

IMO once the stock reaches $77 it could be a good idea to start establishing a new position. I would go out at least 4 months becuase this is a growth company that must be allowed room to run.

there are tonsof shorts left to cover(22% of the current float) and when they begin to cover the stock is likely to rocket.