[AMZN] update

The backlink post was created on July 23rd of this year.  The shares were trading at $585 on that day.  In that post I wrote, "So if earnings propelled this up so strongly, what is going to cause the stock to reverse down hard as shown?  Some kind of fraud?  Or maybe just because the wave count tells us that this is what is coming next.  Maybe, just maybe the price of shares has little to do with business performance and more to do with herding behavior.

Right now everyone is applauding those earnings and there are no negative signs.  Yet I am convinced by the shape of the chart alone that a big pullback is coming.  Time will tell."




Zooming in a bit in the chart below we can see what happened next.  I guess my wave count was pretty good because my post and comments came on the exact day of the peak after which the shares plummeted down to $450 in short order.  So again, those who think that fundamentals drive the short and medium term stock price valuations, please, enlighten me on why the news was saying that the Ponzi Pop was due to earnings?  Did those earnings change since then?  No, they did not.   So even without anything else to go by, one would have to question if the earnings were really responsible or in some way justified the price move.  Again, the DATA, not gut feel, shows that the shares declined below the price on the day of the earnings news.  Thus, one cannot conclude that the efficient market saw the earnings as justification of a higher share price.

But then to be fair, we have to add in the data point of my wave analysis because while the herd was jumping for joy at the pop, I was looking for a big move down.  And not based on gut feel either, but because of the wave shape.  I was clear about this in my post and as it turned out, my wave analysis was exactly correct.  I did not wait for it to happen, I called it in near real time.  It seems that Elliott waves are more in control of what happened to AMZN shares than the earnings news.  So those who laugh at Elliott wave technical analysis are, at least in this case, laughing at their own ignorance.  At least that's what the data shows, gut feel and water cooler conversations with other herd members be damned.

Per the model above, I would not be surprised to see the chart test the underside of the upper rail from below as shown.  This would leave AMZN with a bad case of owl ears AKA declining double top.  This is a bearish formation worthy of investing in some puts over.

Furthermore, SCE, here is another opportunity for the model to continue prove itself.  Below is my larger view of the chart.  Keep in mind that this is log scale.  So a move back to the level of the prior 4th, which is my current target price, would be in the $285 range, a far cry from today's Ponzi price of $530.

The alternate count is that the recent high was just A of 5 and we are now working on C of 5. If the model goes bust by hitting a higher high that $585, the alternate count would become the primary model.  Shorts should wait to see if that top rail is going to prove to be resistance before committing to a bet.  I doubt that the alternate model will play out but EW is an odds enhancement technology, not a crystal ball.  The herd does have real time choice even if the likely choices represent only a small fraction of the overall choices. 

Said differently, a car traveling on a one lane bridge between two points has an infinite number of possibilities that it could take, including driving off the side of the bridge and backing up all the way to the start of the bridge to avoid crossing.  But by far the most likely outcome is that once it enters the bridge it will continue forward until it completes the voyage across the span.