In my background check on BFLY, Yahoo had listed a news article from the Motley Fool about Amazon, which had a passing (emphasis on the 'passing') mention on Bluefly. AMZN is certainly the opposite of what BLFY is in terms of scale of business, and profitability - so were there any parallels I could draw?
Fundamental analysis has its merits, but like Technical analysis, much of it is to do with projections based on prior trends. Unforseens (e.g. Katrina), will impact on the fundamental picture (albeit delayed), just as much as they impact on price (except impacts on price are more, or less, immediate). Is there a measure one can use to get a current reading on fundamentals, without the wait for an earnings report?
For an e-commerce website, I thought the site's Alexa ranking would give the most accurate measure for growing revenues. Taking the 2-yr Alexa chart for Amazon, one can easily identify a solid uptrend in web traffic dating back to late 2004.
Unfortunately, the steady increase in AMZN's web traffic was not reflected in earnings, or its share price.
However, what the AMZN price chart shows is the Big Money buying on the price dips. Then selling into strength, on moves to resistance. This buying occurred independent of earnings - it was a price phenomenon for perceived value in the company. It didn't matter if the company earned $0.82, $0.12, or $0.07 a quarter, Big Money liked the stock on dips to $35, and offloaded it at $45.
What does this all mean for BFLY?
Certainly, the prior fundamentals leave a lot to be desired, with increasing losses on each of the last 4 quarters.
Unfortunately, nobody appears to be paying much attention given recent volume buying. Combined with the breakout from a large bullish wedge.
At $1.40 it won't be garnerning much interest from Wall Street's Big Money. Therefore moves in BFLY will have more to do with the unified force of individual ants following a trail, rather than the action of the larger anteater preying on them.
As for BFLY's Alexa chart, I'll let you draw your own conclusions
For those who operate on fundamentals, BFLY's earnings are to be released at the market close.
BFLY AMZN
8 comments:
If you know it so well, did you benefit from buying at $35 and selling at $45? I don't think so. And as you said no matter what AMZN report earnings, it will go down, did you short the stock before the earnings, or going all-in in the puts? No, you don't.
Need me to say anything more?
No. I did not say "no matter what AMZN report earnings, it will go down". What I was implying was earnings figures had little to do with the perceived value of the company, and hence demand for the stock. If fundamentals were the only factor influencing a stock price, a company which earns $0.82 a Q on 2.5 Bn revenue, should carry a higher stock price than the same company reporting earnings of $0.07 a Q on 1.9 Bn revenue. This was not the case for AMZN (and likely many other companies). Buyers liked it at $35, and didn't so much at $45 (give or take a few $).
No, I don't "know it so well", I was making an observation. And if it was so clear cut and easy, we would all be living the good life. Unfortunately, it is not - but technical analysis at least tries to clarify the actions of price more so than a read of an earnings report.
"Need me to say anything more?"
Well, anonymous posts are sad. If you want to make a statement, you could at least back it up with your name (Elvis excluded).
I could flip this around and ask you did you buy AMZN based on its most recent earnings? Probably not, because of their lukewarm projections for 2006. Would you argue these projections are a better measure of future stock price, than those derived from technical analysis?
Have I got a problem with Amazon? Certainly not, I spend plenty of money with them - free shipping to Hawaii is hard to beat! And, I have never had a problem with their service.
I'll let it rest now....
Ken Gor, not Elvis, posted the first comment.
Thank you
Is this the same Ken?
No, I am not Ken Kam. My name is Ken Gor.
By the way, look at BFLY today.
http://finance.yahoo.com/q?s=bfly
"Unfortunately, nobody appears to be paying much attention given recent volume buying. Combined with the breakout from a large bullish wedge."
I will let you draw your own conclusion whether I am complementing you or not.
Yes - if you traded the "large bullish wedge", you would have taken a loss. Technical analysis defines the risk:reward of this trade. Support turned into resistance. What was a "buy", turned into a "sell". The "bullish" wedge defined the risk, the entry, and the exit price. Fundamental analysis doesn't have the same form of protection (yes, you can use a flat percentage, or point, risk to protect capital - but that is not protection defined by fundamental measures).
Fundamental analysis should be a straight numbers game - plug the values in, and get an evaluation of the company. But fear, and greed, have a nasty habit of rearing their head, and undermining the nature of the analysis. It is the fear, and greed, which technical analysis measures.
When is fundamental analysis considered wrong? Joe Soap buys company A having done his due diligence, but the price keeps falling. Does Joe question his own analysis? Or does Joe think everyone, but himself, is wrong? Should Joe hold to the next earnings report and re-evaluate then? Should Joe buy more at the bargain price? Or should Joe just sell for a loss, and assume he got his analysis wrong somehow?
Joe makes a good investments and fundamental analysis has helped him build a tidy profit. But now he sees his stock down 10% on heavy volume a couple of days before earnings. Does he sell as a precaution? Hold, knowing previous earnings reports have been good? Or wait until earnings and run his analysis then?
By looking at price chart, Joe can gleam support and resistance, see where the big volume buying and selling is occurring, and make decisions on entry and exit. He could even overlay the earnings release on to the chart to get the consensus reaction if 'good', or 'bad'.
If I were you, I would just say, "My bad, I made a bad call." Obviously everyone that bought it in the past 2 yrs are losing money, as it dropped gradually from $4 to last Friday to close at $1.08.
"Unfortunately, nobody appears to be paying much attention given recent volume buying. Combined with the breakout from a large bullish wedge."
No more arguments. You were wrong. Plain and simple.
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