We have been contemplating the nature and shape of this market downturn since the beginning of October. And so far it has played out pretty well along the lines I discussed in the this commentary: Pullback, Correction or Bear Market?.
That being that we are still in the midst of a long term bull market, but likely will spend some time under the 200 day moving average at 2765 and moving into 10% or greater correction territory. That devastating drop to correction levels happened Wednesday followed by a Thursday bounce and a retest of those lower levels again on Friday.
Right now the shape of the drop sure looks a lot like what happened back in January and February. And we all know that after the smoke cleared we got right back to making new highs.
I will go on record saying that I would be very surprised if stocks didn’t hit new record highs at 3000 before the year is out. So even if we have not found bottom quite yet…we will soon enough. This should have you buying this dip instead of running away from it as too many are doing now.
Stock of the Week: Amazon (AMZN)
Shares fell nearly -8% Friday after their late Thursday earnings announcement. Amazingly investors are overlooking the extreme positives that are evident in this report. Like how they obliterated earnings estimates. Yes, they did it on slightly lower than expected revenues, but that actually means that profit margins are expanding at a robust clip. Not easy to do for a company this size.
Also investors are overlooking how many times in the past that management has lowered guidance only to make the bar that much easier to beat in the future. One of the oldest tricks in the book.
Truly Amazon is a case of 2 steps forward and 1 step back when it comes to earnings announcements. And history shows that buying Amazon on the 1 step back, like now, typically is a very wise move.
Here are some other positives from a TipRanks perspective:
- I am not alone in the Buy the dip mantra. Many analysts stepping forward after earnings to take advantage of the opportunity. Quite a few talking up the incredible margin story as being superior to the revenue story. More details.
- The Investor Sentiment gauge continues to tilt positive for these shares. More details.
- Top Financial Bloggers see many more positives than negatives in the Amazon story More details.
By the way, Amazon is one of the 7 stocks recently added to the Smart Investor portfolio I manage for TipRanks. To see the other six stocks…and the next recommendations…and more in-depth market commentary…then perhaps it’s time to check out the Smart Investor portfolio here.
Wishing you a world of investment success!
Steve Reitmeister
Editor in Chief
www.TipRanks.com
Disclaimer: In general, I own the stocks that I highlight in commentary. When you think about it…why would you ever take advice from an investment professional who wasn’t willing to put his money where his mouth is?
