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Don’t buy yet – these stocks have further to fall

Amazon.com (AMZN)

Fallen: 5%                   Consider buying after: 25%?

If you can accept that we are a bit overdue for a correction, then consider the two factors that indicate, more than all others, which stocks will be punished the most severely when the correction comes. First, which stocks have risen the most in the last six to 18 months? In the case of AMZN, that’s a huge 25% to 55%. Second, consider which stocks are unsupported by present earnings (bull markets love potential future earnings; bear markets hate them). In this case, AMZN has the pathetic trailing P/E of 181. If you are kicking yourself for not buying AMZN at $700, don’t kick too hard — just wait.

AMZN

Chart courtesy of www.stockcharts.com

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Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.