Schaeffer's Trading Floor Blog

Chart to Watch: Amazon.com, Inc. (AMZN) Shuffles Sideways

AMZN shares are parked below colliding trendlines

by 2/27/2014 2:00 PM
Stocks quoted in this article:

February has been a relative snoozer for Amazon.com, Inc. (NASDAQ:AMZN), which closed out January by gapping nearly 11% lower following a fourth-quarter earnings disappointment. Since then, AMZN shares have been range-bound, spending the majority of their time between $340 and $360.

Following a bounce off of its 160-day moving average, AMZN is perched at $357.88 and again returning toward the top of this range, where it may face short-term resistance. Beyond the $360 level are the equity's newly descending 40-day and 80-day moving averages. These trendlines are in the process of forging a bearish crossover, which could be a harbinger of continued downside in the shares. The last time Amazon's 80-day trendline crossed north of its 40-day was in April 2013.

Daily chart of Amazon.com, Inc. (AMZN) since June 2013 with 40-, 80-, and 160-day moving averages

If Amazon.com shares continue to stagnate -- or even retreat -- the stock could face additional struggles as bullish holdouts begin to jump ship. The options crowd, for example, has remained relatively sanguine. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) during the last 10 days, nearly 58,100 calls have been purchased to open compared to roughly 52,000 puts. The resulting 10-day call/put volume ratio of 1.12 is higher than roughly two-thirds of comparable readings taken over the last 12 months.

In a similar vein, Amazon's Schaeffer's put/call open interest ratio (SOIR) of 1.00 is at an annual low. In other words, the short-term options-trading crowd is more call-skewed at present than at any other time during the last year. Should options bulls begin to capitulate, AMZN shares could face additional selling pressure.

Wall Street has maintained a similarly rosy view, even in light of the stock's recent fundamental and technical struggles. Thirty analysts currently follow the stock, 23 of whom offer up a "buy" or better rating. In fact, there is not a "sell" to be found on Amazon.com, Inc. (NASDAQ:AMZN). Future downgrades and/or price-target cuts -- such as the one from UBS in the wake of the retailer's earnings news -- could also spark a decline in the shares.


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