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The Amazon stock in the analysis and forecast of the S & P500

The Amazon share in the technical analysis taking into account an overall market assessment. Buy the Amazon stock now.

US market expects a summer rally

The mass of the stock market is slightly bullish. Both professionals and private individuals are in unison. And this is despite the fact that crash prophets come into public every year at this time of year. Marc Faber (Dr. Doom) or Bob Prechter with their interviews are always particularly striking. You can be sure that their conclusions will never be bullish. My tip: don't let yourself be unsettled.

Our season is determined by the stock exchange wisdom "sell in may and go away. There is even statistical evidence for this stock exchange quote, because stock exchange prices often retreat in summer. It does not take into account that stock prices are not always cyclical: those who automatically put their stocks on the market in May just because the month has started can sometimes miss a summer rally.

The mood in the USA

The AAII (American Association of Individual Investors) conducts a monthly sentiment survey, which brought the following result. (04.05.2017)

Bullish 38.1% (-0.1% to the previous month) Neutral 32.0 (+ 1.7% to the previous month) Bearish 29.9% (-1.8% to the previous month)

The AAII conducts this survey every month, which requires market participants to make a forecast for the next six months.

Encourage that the stock marketers have no intention of selling their shares. The US economy is doing too well and there is no end in sight.

Image: S&P500 weekly chart with RSI indicator

There are two trend channels in the upper chart drawn in with the help of trend forks. Each pitchfork forms a trend channel based on three striking price points.

Both pitchforks point upwards and are nested at the same time. It currently looks as if the course will be accelerated again. This effect should continue until the middle of summer.

Trend analysis of the largest Dow Jones companies

Short-term = trend analysis of the past 40 daysMid-term = trend analysis of the past 40 weeksLong-term = trend analysis of the past 40 months

Table: Dow Jones Mighty

The top table shows the six largest companies in Dow Jones Industrial by market capitalization. These companies are hugely important to assess the upside potential of the entire US stock market. The table above shows the trends from three different timeframes.

Although there are three companies on the down and up, there is a slight advantage for the bulls. If you add the longs and shorts together, then it is 9 to 6 for the bulls. This small advantage is the reason for the majority of rising stocks. However, the advantage is not so strong that the bulls have built up a cushion. The next strong downward wave could shift the situation in favor of the bears.

The Amazon stock in the analysis and forecast of the S & P500

Buy Amazon stock?

What do you think about book trading? Most people think of the local bookstore with its range of paperback bestsellers. Electronic book trade only comes in second place. Do you remember? The root of the Amazon group was the electronic book trade. Oh my god, what kind of monster has Amazon become? The book trade still exists, but it only makes up a small part of the company.

Amazon is a typical example of a growth company that wants to gain market share at all costs. Sales, sales and sales again is the motto. If a market stops selling, it doesn't matter. A new business area is founded immediately. This is noticeable with weak business figures.

In mail order, Amazon achieved an operating margin of 0.3%. This is such a small value that other retail companies would panic. Not to mention what stock marketers would do with other stocks - they sell.

There are only high profits in a non-trading area

If you are now wondering how the profits are generated on Amazon, then the answer is "Amazon Web Service". This is an Internet cloud service that provides a service for other companies. Big customers include Netflix and Dropbox. The cloud business is a nice additional income, but one has to seriously ask what should happen to the core competence (Internet mail order business). Amazon's market cap is approximately $ 488 billion. If you pull the value in relation to the company profits, then you have to "swallow hard". The conclusion is imperative: Amazon is extremely overrated!

The Amazon boss, Jeff Bezos, is a gifted seller of his business concept. To keep the shareholders happy, he always comes up with new "groundbreaking" ideas. These keep the share price permanently high.

The latest idea is the food trade "Prime Now" or "Amazon Fresh". In this case, Amazon would like to establish itself as a service provider (trade and bring service). At the same time, you will also be offered a mobile phone contract so that you can make calls. So Amazon wants to start trading in SIM cards. At the same time, Amazon has produced its own clothing collection in the USA so that it can be sold via mail order.

Disagreement as a business idea?

I have just given you a small list of some business ideas. There are many other approaches Amazon is pursuing, and at the latest now, a business economist should get a queasy feeling. Long-term corporate success works differently. Every successful company has managed to build up above-average competence in its special business area. This results in competitive advantages over the competition, and almost leads to a profit.

Amazon, on the other hand, plays at so many weddings that one has to think about an endless amount of beating. In other words, there are so many different business areas at Amazon that there can be no efficiency. Each individual area requires special skills and know-how. Building this know-how requires work and a lot of time, which Amazon does not want to take.

The business model is actually called: Shareholder Value

What Amazon's management has been doing for many years is different Business model than the mail order business. Whenever it becomes difficult for Amazon, the management takes on a new business area. A new idea combined with a new market and the shareholders are already investing. Since Amazon's IPO, management has understood how to keep old shareholders happy and attract new shareholders with new ideas. The stock's price history is the best evidence that it works. One could argue that the real business area is just an increase in the market price. Jeff Bezos is now the third richest man in the United States. His estimated net worth is $ 75 billion.

That was there before - and it didn't go well

Old Boerians will remember the "new market". The majority of the companies at the time no longer exist. The new market consisted mainly of companies that are committed to expanding growth. Revenue growth was the most important criterion for company valuation, and fittingly, stock prices almost went to heaven. A characteristic of the growth companies is that they are very present in times of global prosperity. But in times of recession, the picture changes radically. Only companies with real competitive advantages survive in the recession, fellow travelers die out.

Amazon business figures

Amazon200142015201620172018 sales revenues 7445288988107006135987166164201034

Figures for 2017 are estimates Source: finanzen.net

It cannot be denied that Amazon's sales increases are impressive. Attention should now be focused on company results. For the next few years, the analysts expect strong profit increases. I'm more cautious on this point, because it has been similar in the past few years. Amazon is less interested in profits, and prefers to try to conquer new markets.

Image: Weekly chart of the Amazon share with the RSI indicator

The upward trend has Power

The above statements on Amazon's fundamental location are not particularly encouraging. When looking at the chart, I have to tell you as a technical analyst that you shouldn't consider the arguments above. The share is in a stable upward trend. The chart even shows two nested trend channels. This multiplies the buying pressure again.

Image: Weekly chart of the Amazon share with the on-balance volume (OBV)

The volume trend is stable

A healthy price trend should harmonize with the volume trend. The top three upward waves are marked with channels in the upper chart. Channel (1) affects 2015 and channel (2) is in 2016. The third trend channel is incomplete and can run for an unusually long time. If you look at the course of the OBV, then all three channels are healthy and stable. Well, if you are picky and compare the slopes, you could definitely diagnose a flattening of the slope. Overall, you shouldn't overestimate that. There is only a minimal divergence, and this is not uncommon when looking at the long period.

Conclusion: The stock is up, and should at least maintain momentum into the summer.

Amazon shares: WKN: 906866 on German stock exchanges or US symbol AMZN in the USA

Target price: USD 970.00

Stop loss: US $ 850

Interim target: without

Trading implementation:

If you are short of the short-term stock recommendation want to benefit, you can buy the share directly or work with derivatives. Note that derivatives include leverage and therefore increase the profit and loss potential. In extreme cases, a total loss is even possible.

Trading information:

Stop loss: The stop loss is initially set as an initial stop and has the function of a maximum Loss limitation. Price target: The price target is the exit point for the forecast market movement. Interim target: When the intermediate target is reached, the position is in profit. At this point we take a partial profit and we sell 50% of our position. At the same time, the stop loss is adjusted to the personal entry price. This enables us to close our position without loss, even if the market later turns against us.

Risk warning:

The trading values ​​recommended by Christian Lukas are generally speculative. As an investor, you should always be aware of the risks. Despite careful research, it can happen that the forecast does not match the actual development. It is expressly warned against spreading the investment funds over only a few securities. Due to the speculative risks associated with securities investments, securities purchases should in principle not be financed by credit.

As a precaution, we would like to draw your attention to the fact that the financial analyzes and recommendations on Christian Lukas contained in individual financial instruments provide individual investment advice from your Cannot replace investment advisors or investment advisers. The analyzes and recommendations are aimed at readers who are very different in their investment behavior and objectives. Therefore, the analyzes and recommendations do not take your personal investment situation into account in any way.

Christian Lukas draws your attention to the fact that he may have invested in a recommended value himself.

The Amazon stock in the analysis and forecast of the S & P500

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