Amazing Amazon

09/12/2003 12:00 am EST

Focus:

Bernie Schaeffer

Chairman and CEO, Schaeffer's Investment Research

The analysts at Schaeffer Investment Research each assess stocks from a wide variety of fundamental, technical, and sentiment based-approaches. One stock--Amazon--recently garnered bullish comments from four different analysts, including Bernie Schaeffer.

"Pessimism reigns supreme on Amazon (AMZN NASDAQ), the Internet retailing goliath," says Bernie Schaeffer in The Option Advisor. "Brokerage firms continue to turn their collective noses up at the firm, as only two of the seven covering analysts rate AMZN a ‘buy.’ Future upgrades and added coverage could boost the equity. The stock currently has support at the 43 level, the site of its July high. The shares have also been climbing along the staunch support of their 10-week moving average. We recommend that traders sell the September 42.50 put –a bullish option position."

"Looking at Amazon shows that near-term puts outnumber calls and it's higher than three-quarters of the past year's readings," says Nick Perry. "Confirming this pessimism is short interest of more than 43 million shares, which would take more than four days of average volume to cover. Another sign of skepticism can be seen by looking to data from Zacks, which reports only two of seven covering analysts rank it a ‘buy’. The daily chart shows AMZN shares locked in a steady uptrend. With an encouraging sentiment backdrop, it appears the uptrend is still intact."

Adds Beth Gaston, "A daily feature available on SchaeffersResearch.com is ‘Street Chatter’ in which we focus on stocks that are generating a lot of attention on Internet message boards. The stock recently reached a new high and is trading at levels not enjoyed since September 2000. Since February, the shares have doubled in value. Despite its technical strength, options players remain skeptical on AMZN, as evidenced by the stock's Schaeffer's put/call open interest ratio. Pessimistic sentiment is also evidenced by the nearly 43.7 million AMZN shares sold short, which amounts to a short-interest ratio of 5.5 times. If the stock were to continue its uptrending ways, it would take bearish speculators over a week to cover these shorted positions.

Jocelynn Drake says, "Amazon continues to skyrocket higher along support at its 10-week moving average. The security's impressive rally has carried it to its highest level since September 2000. Despite its awesome gains, investors remain skeptica and open interest at the equity's September 47.50 put has surged. Meanwhile, overhead call open interest in the September series is extremely light, removing the chances encountering option-related resistance. Wall Street even has doubts and any analyst upgrades could give the shares an additional boost. This combination of pessimism against a backdrop of technical strength has bullish implications from a contrarian point of view."

Related Articles on