Daily and weekly chart sell signals have been triggered in Amazon shares by my computer system over the last two weeks.
Amazon's relentless strength this year so far has contributed greatly to the fact that the overall broader U.S. stock market has not demonstrated any significant weakness except in early February.
Amazon shares surged 23.9% in the 2nd quarter and are now up 45.4% year-to-date! This compares to a +2.9% gain in the S&P 500 Index in the 2nd quarter and a +1.7% gain for the S&P 500 Index year-to-date.
Amazon has a current market valuation of $806 billion and trades at 268 times trailing twelve month (TTM) actual earnings and 84 times estimated forward 12-month earnings.
Amazon is one of the five so-called FAANG technology stocks that have posted exceptional investment returns for investors over the last several years. While all the FAANG stocks are amazing companies, some would argue that they are now over-owned and ready for a potential correction. And if the FAANG stocks "catch a cold" and fall back a bit, perhaps the broader market "catches pneumonia" without this key leadership group!
Bottom line: A significant correction in the U.S. stock market is now underway. Investors can expect at least a 20% decline from recent highs posted over the last three weeks. The Nasdaq Composite Index and the Russell 2000 Index both posted all-time record highs on June 20th, 2018. My feeling is that both these indexes will sustain losses greater than the S&P 500 Index over the next several quarters!
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| Amazon Daily Chart with Computer-generated Buy & Sell Signals |
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| Amazon Weekly Chart with Computer-generated Buy & Sell Signals |
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