Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

9.4. 2003–2005 BULL MARKET

When the swiftness with which U.S. forces penetrated into Iraq and took control of the capital city of Baghdad took the crowd by surprise, the market followed through to the upside on March 17, 2003, launching a new bull market. One of the first stocks out of the gate was Amazon.com (AMZN), which we began to play heavily (Figure 9.35). AMZN did not show immediate power as it broke out to new highs on March 17th, right in synch with the market's follow-through on the same day. The stock pulled back over the next four weeks before finding support at the 10-week (50-day) moving average. Volume had dried up sharply on this pullback, so we bought the stock right there.

For the next six weeks the stock closed right at the peak of the weekly ranges for each of those weeks; five of those six weeks closed at new price highs. O'Neil was quick to point out just how constructive this action was, and that he had calculated an upside price target for AMZN of $60 a share. In an interesting coincidence, we owned the stock as well and had used Point & Figure charting techniques to calculate an upside price target of $61 based on the upside thrust of those six weeks where the stock closed right at the peak of each weekly range. AMZN finally peaked at 61.15, with a little climax top type of move in October 2003, and then began building a big, ugly base (Figure 9.36).

Figure 9.35. Amazon.com (AMZN) weekly chart, 2003–2004.: Chart courtesy of eSignal, Copyright 2010