Chart of the Day – BKS vs. AMZN, Talking Numbers on CNBC

by Enis September 26, 2012 2:58 pm • Commentary

Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:

The book wars have basically been declared over.  Amazon has won.  Electronic books are here, and physical book sellers have bowed out one by one.  Barnes and Noble is essentially the last man standing in this battle.  But even BKS knows the future is here.  It’s placing its bets on its Nook product as a competitor to the Amazon Kindle.

I’m normally a buyer of strength and a seller of weakness when looking at charts.  But BKS and AMZN are both in interesting spots, where risk/reward seems skewed in opposite directions.

In trading, price determines risk.  BKS has traded in a range between $10 and $25 over the past 4 years:



The stock has sold off dramatically after the MSFT deal took the stock over $20 earlier this year.  However, it now rests close to the important $10 level, which has served as support multiple times in the past year.  Stock is a much lower risk buy down here near $10 than when the stock jumped to near $20 just 5 months ago.

The second chart shows the 4 year price action in AMZN:



AMZN has been a huge bull market stock, in contrast to BKS, and normally I’d be a buyer of strength over weakness.  But AMZN’s recent breakout looks to be failing, and the stock has not been able to make much new ground in the past year, indicating a waning condition.  In the meantime, the expensive price of AMZN implies a risky entry here, near all-time highs.  I’m a buyer of BKS and a seller of AMZN here.