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Saturday, November 7, 2009

Amazon Revisited and The Game of Upgrades

Look, we all know Wall Street is a crooked game. I am not naive to that fact. The games up upgrades and downgrades was invented solely for the purpose of having maximum timing effect. Even the people who know the game is rigged jump on board because they know it was meant to move a stock or index, even if for only a limited time to the desired direction.

But that is not to say that every willy-nilly change in status will have equal effects on every stock. Indeed with so many "analysts" and so many playing the game, one has to be careful particularly if an analyst times it wrong (misinterprets a chart or mood). No one wants to look immmediately bad.

Another thing is that "price targets" are never actually meant to be hit. They keep these price targets dangling like a carrot to keep the horse moving in the direction they wish to keep it moving. Eventually the horse turns on his own and down the road, the analysts will have to change their targets (and direction) based on whatever direction the horse decides to walk.

So in that sense, yes it is a rigged game. Yet they don't control a stock (I'm talking big stocks, not little ones where there is more direct control) to a point where they can say "this is worth $40" and it magically goes there. The game of analysts is more akin to an art form. I suppose analysts cannot have too horrible of a track record or else the game would be a broken one or they would not be as effective.

(EDIT: yes there probably exists honest analysts who take their jobs very seriously. I salute you but your in a crooked game so we really don't know who you are. Besides, markets don't trade on fundamentals or "P/E's" so its a futile effort anyway)

Amazon had an upgrade Friday that was very timely. It has helped produce a 5th wave up in what I have as a final high for Amazon. The funny thing about Amazon is that it actually hit the analyst's average target of $125 which probably surprised even them. So what do you do? You wait a few weeks to see what happens and then magically issue another upgrade. This time set the dangling carrot target at $160 and see if they drink from the well.

The guy putting out that target certainly cannot justify Amazon's price/earnings (P/E - thats another "game" of the analysts) ratio of 74 yet he is suggesting it go up to 80 or 90! No matter, who will remember anyways? Its a game for the retail. And yes, retail still take these analysts calls seriously (I've watched it in action)

A few weeks back after Amazon jumped up on earnings and hit $125, no doubt many people saw that as a ripe opportunity to buy puts or short the stock figuring it was way overrated. (And it did slowly decline on a 4th wave but it was choppy). And of course I said that that was exactly the reason Amazon will likely hit $130. The stock will drop when its ready but not a moment before. Wave theory and trendlines and technicals can help identify those potential turns.

I mis-read Amazon's charts on more than one occasion on this P2 rally to my small detriment. But that doesn't mean I pack it in and call it a day. I failed to let the true pattern reveal itself which requires time. Will my charts pan out?

Amazon is pointing toward a pop on Monday and final squiggles to a high. My target is roughly $129+ to $133. Maybe a tad more, maybe a tad less. The key is to count the final squiggles.

I've got Amazon honed in on many chart scales. Amazon has a fairly clear wave pattern both long, medium and short term. Those make for a nice "synergy".

Sometimes this all works out very nice (BIDU - clear charts) and sometimes getting the final squiggles to a high doesn't work (AAPL - not as clear). Amazon seems clear enough to me for now.

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