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transformation, the volatility of the stock (as measured by the 30-day implied volatility) has become more and more subdued, such that Amazon seems utterly placid compared to its earlier incarnation. Another way to view this same sea change is by way of a trio of moving averages: the 50-, 100- and 200-day exponential moving averages are shown in Amazon, right, without the price data for the sake of easy viewing. The dynamism and gyrations of these lines have, year-by-year, become much calmer, with only market-wide shocks like the February/March 2020 COVID19 plunge sending tremors into an otherwise placid ascent to ever-increasing prices. Monster gains elsewhere Examining Amazon’s history—its giant ups and its stomach-turning downs—provides some comfort for any who missed the boat (which is about 99.999999% of humanity). Virtually no one who had the foresight and courage to put money into this upstart in May of 1997 would have held on for the duration. It would be interesting to know what percentage of retail buyers in March 1997 still have the stock, but it’s an extremely small number. The stock’s more recent performance doesn’t match its stellar past. It’s still highly valued and rather expensive based on any traditional fundamental metric. Anyone seeking multi-thousand percent gains had better look elsewhere because the glory days of Amazon are surely behind it. It’s easier for a $10 million company to grow 2,000-fold than it is for a $1 trillion company. There simply aren’t enough people on the planet to buy socks and air fresheners to create that kind of marginal growth. Perhaps the biggest lesson to learn from Amazon is that the saying about “no such thing as a free lunch” applies to long-term, life-changing investments. It’s easy to look back at the fantastic gains, but to actually enjoy those gains, one has to be practically blind, deaf and dumb to the dreadful fluctuations endemic to a high-growth, high-risk stock. Human nature does not lend itself well to that kind of behavior, but for those blessed with bravado and faith, the rewards have been unfathomably large. Tim Knight has been using technical analysis to trade the markets for 30 years. He hosts Trading the Close daily on the tastytrade network and offers free access to his charting platform at slopecharts.com.
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Luckbox | June/July 2021
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5/13/21 3:20 PM
