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3D Surface Plot of Returns: Upside Price Pattern for Amazon

Investors and traders buy stocks on the price upside because most buy and sell combinations are profitable as prices rise.

The following 3D surface plot for Amazon (AMZN) displays the pattern of monthly percent returns for the 28,203 returns based on 238 monthly closes from May 1997 through February 2017, a period in which current prices were on the upside. Prices rose steadily from May 1997 until they peaked in March 1999. Prices then crashed and bottomed in September 2001. Prices recovered to produce a sustained upside which is at an all-time high as of February 2017.

Each of the 24,862 (88.15%) profitable returns is shown in green and the 3,341 (11.85%) unprofitable returns are red. The preponderance of profitable returns given a large number buy and sell combinations shows why investing in stocks on the long-term price upside produces wealth.

Note: Each return is computed using its unique buy and sell date and prices where percent return = ((Sell price - Buy Price) / Buy Price) * 100.

Interpreting the 3D Chart

The buy axis runs from the left (1997) to the right (2017). The sell axis runs from left (1997) to right (2017) along the right side of the chart. The buy axis and the sell axis form the floor of the chart. No trades can occur in the flat green area because the buy date is after the sell date or the sell date is before the buy date. The pattern of positive returns (green) looks like a mountain range whose elevations are directly proportional to the magnitude of the percent returns. The negative returns (red) lie below the floor and appear as shallow scooped-out valleys. The front left corner of the chart is the return for the first buy price and its first sell price.

Returns for specific buy dates are displayed as slices that run from front to back across sell dates. Returns for specific sell dates are displayed as slices that run from left to right across buy dates.

Left Edge Returns

The left edge of the chart displays 237 monthly returns for the May 1997 buy date starting with the June 1997 sell date (front left corner) and ending with the February 2017 sell date (back left corner). Read the monthly returns from front to back. All returns are profitable (green). These returns mirror the price path from the start to the end of the price series. Returns peaked on February 2017 (back left corner) at 55,390%.

Back Edge Returns

The back edge of the chart displays 237 monthly returns for the February 2017 sell date (back right corner) starting with the May 1997 buy date return (front left corner) and ending with the January 2017 buy date return (front right corner). All returns are green for this slice. And most returns are green for other sell dates just prior to the peak date.

Buying at the Peak Returns

The valley between the two prominent green ridges results from buying at or near the 1999 price peak. The largest red patch in the left front edge of the chart results from buying at relatively high prices just before and after the 1999 price peak and selling during years of lower prices after prices crashed. Eventually prices rise so returns turn profitable as shown in the green area of the valley.

Buying at the Bottom Returns

The lower green ridge of returns located to the right of the left edge of the chart results from buying at or near the 2001 price bottom. Buying at low prices produces profitable results for most buy and sell returns.

Numerous Small Red Areas

The small red areas along the diagonal of the flat area represent short-term unprofitable returns.

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Price Chart for AMZN


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