Amazon Stock: One Day Later After ‘Big Gain’ (NASDAQ:AMZN)

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Investment thesis

Rule 1: Investing in stocks is about making more capital gains than losses.

Rule 2: This requires good forecasts, so find good forecasters. Like market makers.

Rule 3: Test all forecasts to find out how they can help you achieve your goals.

Rule 4: Compare current forecasts available on all available choice alternatives before deciding to act.

What the Amazon.com, Inc. (AMZN) Prospect Looks Like Now

Figure 1

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This is the same image format as shown in the previous article, but updated for the trading implications of the day as a forecast of the far right vertical price range and the close price of the day. For comparison, Figure 2 provides MM’s forecast price range on Friday and past performance history for the standard portfolio management discipline.

Figure 2

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While today’s forecast rose +35% from the day’s close at $3152, the decline also extended to its boundary rising less than the market price, widening the forecast range by 32% at 55%. The reward/risk ratio goes from 2.3 to 1 to 5.9 to 1 in the process.

This may sound very advantageous, but evidence from a now much larger sample of past experience operating under the new circumstances produced an average net gain of just 3.8% per trade, compared to 5.3% expected by Wednesday. Between the two days, the odds of having a profitable trade went from 6 in 8, 75 in 100, to 2 in 3, or 67 in 100.

The fullest measure of the changing proposition is that the annual CAGR rate of return in the previous situation was +24% per year, and now it should be +18%.

From an Opportunity Competition perspective, when we look to see AMZN’s ranking in the list of CAGR-producing Top Prospect Actions, there are over 250 lead investments CAGR more capable than AMZN when ratings similar are made to their situations and projected expectations. Of the top 20, 16 offer three-digit CAGRs.

Conclusion

We may have missed a great opportunity to pounce on a +15% one-day gain, but we’ve been distracted by plenty of more attractive prospects based on information from an equivalent source. The attraction of today Amazon seems outmatched by many readily available alternatives. Tomorrow is another day to invest in the pursuit of a good opportunity to build financial wealth. Please keep in touch through Seeking Alpha.

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