Prime Buying Opportunity for Amazon Stock

Prime Day has Amazon stock in focus once again

by Patrick Martin |

Published on Jun 29, 2017 at 1:48 PM
Updated on Jun 29, 2017 at 1:48 PM

Amazon.com, Inc. (NASDAQ:AMZN) managed to find itself in the news again today, as it announced the date of its vaunted Prime Day -- July 11 -- a much-hyped one-day stretch of price cuts for Amazon Prime members. The FAANG stock hasn't been immune to the tech-sector turbulence during the past month, yet the e-tail giant's recent dip could represent an intriguing buying opportunity. Below, we'll discuss how the stars may be aligning for AMZN stock in the short term.

In addition to Prime Day, Amazon has remained in the news lately due to its attention-grabbing purchase of Whole Foods earlier in the month. This acquisition sent shock waves through the grocery sector, with effects that are still felt today. For example, meal delivery specialist Blue Apron Holdings, Inc. (NYSE:APRN) went public today, after pricing its initial public offering (IPO) at $10 per share. Earlier this week, the company had to cut its expected IPO price range from $15-$17 a share, and it is widely believed Amazon's buyout of Whole Foods took some of the wind out of APRN's sails.

At last check, AMZN stock is succumbing to the aforementioned tech headwinds, down 2.1% at $969.45. However, the shares remain roughly 30% higher year-to-date, and touched a record high north of $1,000 earlier this month. The security could resume its quest for four-digit territory, if recent history is any guide.

Amazon stock is now within one standard deviation of its 40-day moving average, following a notable stretch above this trendline -- a historical "buy" signal. According to Schaeffer's Senior Quantitative Analyst Rocky White, after AMZN stock's last 13 pullbacks to its 40-day moving average, the shares went on to average a gain of 2.14% in the next week, and were higher 69% of the time. Extending this data out to on month, the average post-signal return is 5.21%, with Amazon stock higher 83% of the time. 

What's more, AMZN tends to be one of the best stocks to own in July. The shares have averaged a 7.5% gain during the month, looking back over the past 10 years, and have turned in a negative performance just once over that time frame. Plus, Amazon is one of the best stocks to own in the third quarter, historically, averaging a gain of 15.5% in the last decade.

AMZN 40day

Not only is this a prime buying opportunity for AMZN stock, its near-term options seem reasonably priced. AMZN's Schaeffer's Volatility Index (SVI) of 21% stands higher than just 28% of all other readings from the past year. This means that near-term options traders are pricing in relatively low volatility expectations.

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