Will Prime Day Be A Good Day For Amazon Stock?

What is Prime Day?

Amazon started Prime Day in 2015.  It is typically a one day special event of deals and discounts on just about everything available to amazon prime members. This year, It will be held July 11th.

However, as it is with most special commercial celebrations, and yes – Prime Day was started to celebrate the anniversary of Amazon, this year Amazon Prime Day starts at 6pm the day before, July 10th.

Of course the real reason for Prime Day is to generate more Prime memberships, to build a base of consistently returning customers and, therefore, reoccurring revenue. Amazon is even expanding their event to more international customers to the count of 13 countries around the world.
Many consumers will use this day to test Amazon’s Prime service, and many of those customers will remain Prime members once their trial membership is done.

Studies have shown that Prime customers spend more than twice what nonmembers do, so it’s no wonder Amazon is trying to spread the Prime love as much as it can.

I’m sure Jeff Bezos would say it is a “Win + Win” deal.

How popular is it really?

Amazon doesn’t disclose precise numbers, but some analysts estimate that Prime Day 2016 may have generated $525 million in sales for Amazon, up 26 percent from Amazon’s projected sales of $415 million in 2015.

According to Amazon, the company sold more than 90,000 TVs, over 1 million pairs of shoes, 200,000+ headphones, 23,000+ iRobot Roombas, and more than 14,000 Lenovo laptops on Prime Day alone. That beats the number of sales the retailer generated on Black Friday, which for most retailers is considered to be the biggest shopping day of the year.

How easy is it to find deals, shop and buy?

This year, with the added global access and even greater push for trial access to Prime, the Amazon App (which is always free) and Amazon gadgets (Echo – Echo Dot w/Alexa, Kindle, Audible, Dash, etc) there promises to be yet more Prime Day records broken. Amazon will be running specials not only online but through their mobile channels (Echo, Kindle, Audible) with specific deals targeted for users of these devices.

How easy is it? Just ask Jeff Bezos . . .

Just kidding, but it is getting easier and easier to purchase not only what you need for day to day living but for all those impulsive moments as well.

The power of ecommerce has even forced the worlds largest sport and leisure shoe manufacturer, NIKE, to re-think their strategy and start selling directly to consumers thru Amazon and Instagram. It’s an online world and most consumers have mobile devices which they care with them for instant online access.

Mobile ecommerce only makes sense.

I wonder if NIKE will be “online” in time for Prime Day? As of this writing (July 4th) I did not see their direct link listed on Amazon yet.

Are there Prime Day issues?

Yes, with this popularity there have been issues with finding good deals on products you actually want as well as general supply and demand. There have been many instances of consumers complaining that many of the special deals are not always on things they want, or are of cheaper quality than they expect, and for the items they are searching for, difficult to find and then when they do find them the deal is either over or sold out.

This year Amazon is helping you out by suggesting to download their app from which you can look up the schedule of daily deals and place a watch on the ones you want. This way the app will alert you when the special is about to start.

You can even download an Amazon Assistant to your desktop to help you stay up to date on your wish lists and orders.

How does Amazon stock react to Prime Day?

This one is a bit more difficult to answer. For one, this is just the third year that Amazon has hosted Prime Day. And two data points, or data sets, does not a pattern make – other than a straight line.
However, in 2015 the stock price increased the week before and kept increasing the week after.

In 2016, the stock price increased the week before but then went down the following weeks.

So what will happen this year?

Lately tech stocks, including Amazon, have been beaten down by the market. Will Amazon’s stock price continue its downward trend or will prime day provide the opportunity for investors to look at Amazon stock as another online bargain and reverse the trend?

My personal opinion is that Amazon, as well as many other tech stocks, has a bit more to fall. There may be a few fake reversals but to date the stock is only down 5%. Hardly the correction needed to inspire investors to scoop up a bargain.

What are your thoughts?

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Competition

stock-trading-competition

My, or rather, our investment club has done quite well since our previous leader mysteriously disappeared and we were forced to “elect” a new leader.  In our case, co-leaders.

We have attracted new members, diversified our topics of discussion, and now have a monthly newsletter which recaps meeting agendas and topics of interest.  The club has a really good mix of growth investors, chartists, value investors and option players.  An interesting thing about this added diversity is that it has really expanded our “Stocks of Interest” section or our meetings and newsletters. 

Previously, any stock list provided was strictly a select list of IBD stocks Don, our previous group leader, picked himself.  In and of itself, IBD is not a bad investment strategy, but it is not the only one.  We now have a good mix of investment ideas and styles which really has added value to the group.

Prior to each monthly meeting, everyone sends in a hand full of stock suggestions as well as any topics of interest that they wish to discuss.  These get added to the newsletter which is distributed prior to each monthly meeting. 

Obviously, these stocks of interest are our monthly watch list but lately it has also turned into a bit of a competition to see who does best.  I call it the WSSG watch list which gets displayed right along with my own BWTB watch list on the side bar.

Last month we had a pretty good discussion comparing different stock screeners and how each of us use them to find potential investment opportunities.  Funny thing about that and our stocks of interest for this month is that it spawned some creative screens. 

For instance, looking for something different to do both my son and I looked for potential setups that we normally may not specifically look for.  He used FINVIZ to pick stocks setting up with potential bullish breakout patterns such as ascending triangles or inverse head and shoulders.  I, wanting to keep with an IBD flavor, looked for IBD momentum stocks with high sales and EPS that are reporting this month. 

All this has me wondering . . .

What other ideas and strategies do people use in investment groups as learning opportunities?

A Stock Market Equinox

fall-leaves

Historically speaking, the time of September is some of the worst performing weeks for the stock market. Ironically the first three days of this month have seen healthy gains in all three indexes.

But, just like the equinox, fall may be just around the corner.

There are several theories as to why this time of year is such a poor performer. Some say it is because the summer months typically are lower volume and folks are away on vacation. When they return, volume and selling picks up. Others say it is because many companies, financial and investment firms included, have their end of the fiscal year during this time and like most people at the end of the tax year, jettison their poorest performing stocks.

Whatever the reason, I happened to notice another interesting pattern in part thanks to a chart / pattern happy co-worker of mine who started talking about the “dip” the markets took at the end of last September.

I started wondering if this “dip” was a characteristic of the last two weeks of September or if last year was simply an anomaly.

Well, as it turns out, the market went down 70% of the time over the past 10 years following September expiration.

Could we be setting ourselves up for a fall, or brief stumble?

Another interesting pattern I noticed, even with the downturn, the indexes ended up finishing the year off with a positive trend line.

Keeping in mind the famous CYA quote “Past performance is no guarantee for future returns.” There are a few things that could influence the market in the coming weeks.

The Fed could surprise us.

OPEC nations could agree to cooperate with themselves and more importantly oil production.

Though I personally doubt either will happen.

So, what do you think? Will history repeat itself? Are we on the verge of a stock market equinox?

Why I Bought Activision ATVI Yesterday

Everybody has their own investment style and methodology.  One that I have developed over the years is to use a combination of different criteria to select a stock for my watch lists.

For instance:

          One can select a stock based on fundamentals.

          One can select a stock based on good quarterly reports, analyst upgrades or institutional buying.

          One can select a stock based on chart patterns and lines of support and resistance.

Any one of these might be reason enough to buy a stock but there are no guarantees that it will go up.   There is a theory of high probability trading.  Usually this theory applies to price/chart patterns such as a range bound stock that bounces off of support and resistance lines.  But I apply it not only to one criteria, such as price/chart patterns, but to multiple criteria – like the ones mentioned above. 

When a stock meets one of these criteria, it might get my casual or passing interest.  When a stock meets two It gets my attention.  When it happens to meet three, I am usually tempted to take action.

ATVI has:

          An IBD composite rating of 92 out of 100, which is good.

atvi-ibd-composite

          Recently reported a good quarterly report but did not advance as expected.  This was most probably due to the lack of institutional buying.  However, ATVI was recently mentioned in more than one article I read about hedge fund investors either adding to or buy new positions.  (I don’t count this as heavily as true institutional buying but it is note-worthy 

          And as a result of Tuesday’s sell off, ATVI is at both the lower end of the Bollinger bands

atvi-bollinger

       and a rising trend line as well as a horizontal support line determined by Finviz.com

atvi-finviz

 

          And if one looks at both the weekly short term options as well as the longer November options, both tend to favor the call side.  Again, not always reliable, but still note-worthy.

 Of course there are some possible negatives to this stock as well.  Tuesday’s drop off was quite sharp.  Over 5%. 

          Tuesday’s closing price is more than 8% off of the most recent high of 43.05 which is technically an IBD sell signal.

          As mentioned before, institutional, high volume buying is absent.  It gets a “D” rating in this IBD category rating.

          Tuesday’s closing price was also below the 50dma.

There are definitely two ways to look at this stock.

          One is that a bearish reversal is starting.

          The other, is that ATVI is an out-of-favor quality stock hitting key support levels

Only time will tell which is true.  However, I do see ATVI as an out-of-favor quality stock which happens to be at some key support levels.   In the long run I expect this stock to recover quite nicely.

That is why I took a small (1/4) opening position at the closing bell, to limit my exposure just in case I am wrong.  If it looks like I am right, I will add more later.  This way I scale my way into a position instead of risking a whole position at once.  The same methodology can be done for selling too, in order to protect profits.

 

Nevermind

So my artist to be daughter started her first part-time job at a local supermarket this summer. The other day she came home and hesitantly told us about a conversation she had with her boss as she was leaving. Her boss asked her if she wouldn’t mind working more hours. Now this is an open ended question and my daughter was not exactly sure what she meant but being new said “sure, what did you have in mind?”.

Boss: “Well, if we need to, can you work 48 hours?”
Daughter: “Umm, well I prefer less but if it is only for a week or two I guess…”

When I heard this I said, that is not part time work. In fact that changes a lot of things. For one, do you get overtime?

Daughter: “I don’t know”
Me: Well, you basically have to. And I’m surprised they would even consider this. Most businesses keep workers under 32 hours because of benefits and wages. It’s cheaper. This doesn’t make sense.

My wife who has to either share the car with her or play chauffer, said no way. You can’t do that. And what about when you start college in the fall. There is no way you can work full time and go to school full time.

Well, this conversation basically went in circles for close to a half hour before my daughter started talking about how she really hasn’t worked many full shifts yet. They keep scheduling her for anywhere between 4 to 6 hours at a time. This makes a lot of sense, especially with this being, or at least having been, a part-time job. She likes working the shorter shifts. She doesn’t get more than a 10 minute break but it is easy to do. When she works 8 hours she gets a lunch break but she ends up being there 8 and half hours, which means, with travel time, she uses up over 9 hours of her day working.

I know, horrors! A 9 hour work day! 😉

But for a teenager, this is cruel and unusual torture.

My wife said she would actually prefer working for 8 hours because she knows she would get that mandatory lunch break and most likely have more “full days” free. The theory being that one most likely would end up working just 3 days a week.

When I heard my wife, a little light bulb went off in my tiny little head. Hey, you said for eight hours. I wonder if your boss meant for you to work for 8 hours instead of less. Not 48.

Almost everybody in the room simultaneously proclaimed “Ohhhhhh, Ha ha ha! I bet that is what she meant . . .”

What does this have to do with stocks?

Absolutely nothing, but it was a funny story about hearing one thing and thinking another.

But since this is a blog about stocks and investing, this does remind me of keeping an open mind about events, statements, their different meanings and affects on people and the stock market and possible “opposite” correlations.

I know, its a stretch but please hear me out.

For instance. When sports authority announced they were going out of business, other retail stocks such as Under Armour (UA) dropped in price. This was an indicative sign of the struggling retail brick and mortar economy. However, a little voice in the back of my head said, maybe other sports stores would benefit from increased traffic from out of luck sports authority shoppers. Sure enough, Dicks Sporting goods (DKS) has seemingly benefited from the demise of Sports Authority. They have won the rights to quite a few of their old retail locations and the stock has had a very nice run lately. It will be interesting to see if this continues to have legs for the rest of the year.

Secondly, and much more tragically, the resent events in Minnesota, Louisiana and Dallas have highlighted many of the divides that still exist within our country. And if I may pull out my soap box, it really bothers me that a potential presidential candidate and an entire campaign could be successfully run based on nothing more that exploiting this fear and anxiety. Long before these resent events, I had bought a small partial position in SWHC and a December Call Option before their last quarterly report not based on racial divides but based on concern over legislation, gun ownership, and the 2nd amendment rights and, more importantly the upcoming presidential election. I figured gun control would be a topic of discussion in the coming election and I also figured that Hillary would most likely defeat Trump. Which would put all the 2nd amendment right advocates up in arms . . . Pun intended. Soap box time again, I am not supporting either candidate. Quite frankly, I don’t like either one. I’m just more worried about what might happen if one gets in over the other. .

Thirdly, on a much lighter note, the latest Pokémon Go game app is taking the country, if not the entire world by storm! Everybody smart phone owner I know under the age of 28 is playing this. I even so folks playing this in the Church parking lots this past Sunday. It seems the church and the associated school were important locations for finding Pokémon. Sheeesh! All this has sent Nintendo’s stock from a Wednesday close of $17.63 to a Monday morning open of 29! BTW, I don’t recommend chasing this. You might think that other gaming stocks could also benefit from this and future “copycat” apps and you might be right. Personally I would look at EA. Between Sports related games and apps, the Olympics are coming up, and yet another season of American football starting up soon, EA stands to benefit greatly. Additionally, there was another blowout entertainment event over the weekend in the form of a movie. The Secret Life of Pets blew every opening estimate out of the water this weekend. EA games has a great little game app for this. So EA, ATVI and NTES would be safer bets in my opinion.

And, just in case you don’t catch the reference to Nevermind, there are actually two – one being from the band Nirvana (which is not my reference) the other (which is) is from the older more original Saturday Night Live cast. Here is a gem of clip from my misspent days of youth. Before the days of the internet, apps, and social media.