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Amazon launch produces short covering rally

Short sellers in Aussie retail stocks took a look at the prices available on Amazon’s first day and worried

It’s early days but the first few hours since Amazon launched have seen a high momentum rally in retail stocks like Harvey Norman and JB Hi-Fi. This has no doubt been fuelled by short covering. Even Myer has had a positive day.

It’s hard to get analysis of comprehensive price comparisons at this early stage but markets appear to be forming the view that Amazon is not leading with the concerted 30% price discounts some anticipated

This may have something to do with the fact that initial offerings are weighted towards third party offerings via Amazon Marketplace rather than first party suppliers.

There is likely to be a long way to go in this retail warfare and it may be a couple of years before we get a reliable gauge on the kind of margin pressure and market share changes that Amazon produces. However, first impressions count and it appears that consumers and investors are a less impressed than they expected to be

In the case of Harvey Norman, a weaker open this morning followed by a major rally has left a large bullish engulfing pattern.

The next test will be whether a more comprehensive analysis of Amazon’s pricing sees the market push Harvey Norman into clear air past resistance and the 200 day moving average

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