The Trendline That Could Give Amazon.com, Inc. (AMZN) a Short-Term Boost

Amazon.com, Inc. (AMZN) recently pulled back from record highs

Kirra Fedyszyn
Dec 1, 2016 at 3:23 PM
facebook twitter linkedin


Online retail giant Amazon.com, Inc. (NASDAQ:AMZN) has been a long-term outperformer, trending higher since early 2015. In fact, the stock has added 56.7% relative to its February annual low, and hit a record high just south of $850 in early October. Since then, the shares have been pulling back, but found a solid level of support above the round $720 level. More recently, AMZN has touched its 160-day moving average -- a signal that has historically been a bullish indicator.

AMZN Daily Chart December 1

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, AMZN has pulled back to the 160-day moving average four times in the past three years. Five days after such a signal, the stock has averaged a healthy 1.6% return, and been positive 75% of the time. A bit further out, however, AMZN has tended to underperform. In fact, 21 days post-signal, the shares have averaged a 2.2% loss and mustered a positive return just once.

If AMZN stock manages to bounce this time around, it could get a boost from an unwinding of some bearish bets in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.01 ranks higher than 73% of all readings in the past year. Plus, traders have been particularly put-heavy toward the stock when it comes to near-the-money options in the December series, per AMZN's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 1.43.

Today, AMZN's options pits are buzzing with traders placing last minute bets. The weekly 12/2 series is dominating the action, accounting for all 10 of the stock's most active options. In the lead is the 750-strike call, where a mix of buy- and sell-to-open activity is detected. Buyers foresee the shares taking out $750 by Friday's close, when the weekly series expires, while sellers are betting on the round-number level serving as a short-term ceiling.

Outside of the options arena, sentiment has been mixed. Short interest on AMZN climbed by 13.2% during the most recent two-week reporting period, and now sits at its highest level in six months. On the other hand, the brokerage bunch has been solidly in AMZN's bullish corner, with 90% of analysts rating the stock a "buy" or better. Plus the average 12-month price target sits deep in never-before-seen territory, at $922.12. Today, however, Amazon.com, Inc. (NASDAQ:AMZN) is trading 1% lower at $742.91, after Canaccord Genuity slashed its price target by $25 to $875.

Schaeffer's Expiration Week Countdown subscribers just made 100% GAINS on Amazon.com (AMZN) calls! Sign up now for a trial subscription.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 

Partnercenter