How to Play the Apple vs. Amazon Digital Battle

NEW YORK (TheStreet) -- I started looking at Amazon (AMZN) stock today thanks to  a cool Morningstar article written by Director R. J. Hottovy, CFA, about Amazon being one of "the most disruptive companies in the consumer space."

Years ago, something "disruptive" was offensive.

Not offended but certainly curious, I started to read more about Amazon, which I have shorted a number of times and have done so with excellent results. I wanted to learn more about what Amazon is up to and if I want to trade it in the upcoming week.

In my research, I came across the Apple TV versus Amazon Fire TV competition, and really delved into The digital media war between Apple (AAPL) and Amazon. I hadn't really thought of Apple and Amazon as adversaries because I think of them as being very different companies. But are they really?

Differences between Apple and Amazon:



Interesting....

It's easy to see why Apple can do a 7:1 stock split (effective June 9, 2014) with the hope of long-term growth. The only weak point in Apple's long-term picture for me is I'd like to see Apple put forth an amazing, major innovation. 

As far as the long-term picture for Amazon, I am incredibly impressed with Amazon's innovative thinking. I've seen the at-home shopping/delivery offerings for years and not until we saw Amazon Dash was my family interested in doing it. Amazon Dash is brilliant and I am excited to begin using the service.

Aside from considering innovativons when deciding about whether to invest long-term in either Apple or Amazon, it is important to take notice of the digital media war between the companies.  Music, Videos, Books, Apps, and TV are all part of this digital media arena. Apple wins in music and apps, while Amazon wins the title for books. They're both doing well in the video category and it is yet to be determined whether the Amazon Fire TV is better than Apple TV. Since the Amazon Fire TV's April 2, 2014 release, the TV wars have begun.

By early accounts, it appears Amazon Fire TV is hitting a home run since it offers a subscription streaming service featuring thousands of movies and TV shows.

Would I buy and hold either Apple or Amazon? Yes, with caution. If Apple focuses on making great iPhones and they develop something new and innovative, the long-term outlook is amazing. Otherwise it becomes just another IBM (IBM).

If Amazon finds a way to reign in and capitalize on their innovativeness and tech greatness, they will revolutionize more than just the book industry, and we can all watch their stock price grow to a point where they may want to do a 7:1 split, sometime within the next three to seven years.

From a technical perspective, Apple is tricky, as always. The last daily candlestick shows Apple is bullish, as it opened near the lows of the day and closed near the highs. Also, the last daily candlestick made it a bullish engulfing pattern. Slow stochastics shows that the stock is highly overbought, but is still continuing to extend upwards.

These are conflicting indicators, however, I feel that after the high jump on Thursday, Apple will continue to extend in a bullish pattern. My Chaikin Analytics Tool indicates that Apple has strongly bullish technicals and fundamentals and gives the stock a "bullish" rating, however, not a "very bullish" rating. There is no specific buy or sell indicator at this exact time.

From a technical perspective, I'd short sell Amazon because the moving average lines are touching, and a touch back often foreshadows a price decline. Slow stochastics are at about 60, heading downwards, indicating that Amazon's stock is overbought. The daily candlestick shows a long drop and a close near the low, further confirming a further drop in price. My Chaikin Analytics Tool tells me the relative strength vs. SPY is very weak, and that short interest is very high. Chaikin gives Amazon a "very bearish" rating and give it a Sell indicator.

I do not currently own a position in either Apple or Amazon, but am considering trading in Amazon within the next three to five days.

Whether or not you choose to subscribe to one of Amazon's or Apple's digital media offerings, or to invest or trade their stock, I wish you

Many Happy Returns,
Rachel

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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