Amazon: Jeff Bezos Should Not Be Smiling

Jeff Bezos, the founder and CEO of Amazon.com (NASDAQ:AMZN)., is now the fourth richest person on the planet after the company’s stock climbed to a new all-time high at 703 dollars a share on Tuesday, May 10. And while mainstream media would only tell you the news, rating agencies are easily infected by mass optimism, which could be very dangerous.

Bernstein hurried to raise their price target on the stock from 770 to the mind-blowing 1000 dollars a share yesterday, which might make investors think there is plenty of upside potential and it is a good time to buy Amazon stock. Unfortunately, the Elliott Wave Principle, applied to the chart below, shows a very grim picture.

The weekly chart of Amazon stock shows the entire uptrend since the bottom of the Dot-Com crash in 2001. It is hard to imagine that Amazon’s journey began at 5.51 dollars a share and 15 years later, the price took out the 700-dollar mark. However, no trend lasts forever. According to the Wave principle, trends move in five-wave sequences, called impulses. What is more important is the fact that every impulse is followed by a three-wave correction in the opposite direction, before the larger trend resumes. As the chart visualizes, three degrees of impulses fit in one another to form a one giant pattern, that appears to be approaching to its end.

While the company’s business model might be looking stronger than ever, its stock does seem that healthy. According to this count, the uptrend is in the final stages of wave V of the entire impulsive sequence. In addition, the relative strength index unveils the bulls’ declining power by showing the typical bearish divergence between waves III and V of the pattern. If this is the correct count, despite the new all-time high, Jeff Bezos and other Amazon investors should not be smiling, because the e-commerce giant’s stock seems poised for a long-lasting bear market.