1512.29 -76.99 (-5.09%) Sell

AMZN is a falling knife, continues to bleed every investor trying to catch it

13 min read

AMAZON COM INC delivered massive losses on Monday. It returned -5.09% to close at 1512.29. On a day when the overall market breadth was 36%, it closed higher than 3% of the market. In comparison, the benchmark SP500 index closed today at -0.0166%.

[Themes containing AMZN]

Buy-and-Hold investors in AMZN experienced a maximum drawdown of -25.85% over the last three months. It returned -19.42% during this strong down trending period. There were both Long and Short signals during this period, where the short signals were significantly more profitable than the long signals. The net profit from Short signals was +13.84%.


AMZN has been underperforming the SP500 index in recent time, after having outperformed till 4 Sep, 2018. Over the last 2 years and 11 months, AMZN outperformed the SP500 index on 54% days.

During the last three months AMZN was mostly loss making and delivered on average -0.29% per day. It's best return during this period (of +7.09%) was on Thursday, 25 Oct, 2018. While it's worst loss in the same period (of -7.82%) was on Friday, 26 Oct, 2018. There was initially a bullish trend during this period which started on 24 Aug, 2018 and went on till 4 Sep, 2018. The bullish trend returned +7.01% to investors. This was followed by a bearish trend that started on 2 Oct, 2018 and ended on 8 Oct, 2018. This bearish trend lost -7.19% of investor capital.

On monthly basis, AMZN delivered profits in more months over the last year, than losses. AMZN delivered profits less regularly than SP500 index. AMZN significantly outperformed SP500 index in Jan 2018, when it returned +22.03% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. AMZN had a shorter streak of profitable months than SP500 index. It only went up in 5 straight months during the last year. It is interesting to note that both AMZN and SP500 index significantly outperform during months when quarterly/annual results are announced.

Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this.
-- Dave Ramsey

AMZN is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in AMZN's volatility from 28 Aug, 2018 to 29 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 20 Aug, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that AMZN has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

Investors trading in AMZN derivatives at this moment can consider 'Calendar Spread' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than AMZN. Therefore, SP500 must receive a lower allocation than AMZN in your portfolio. SP500 index usually has shorter drawdown period than AMZN.

On a general note (since you are interested in AMZN), three large cap instruments that deserve special mention are AMZN, VZ and MSFT. They have all outperformed the market and must be closely watched for investment opportunities.

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