Monday's retreat could be a buying opportunity for bulls
So-called FAANG stocks got smacked lower yesterday, as the tech sector fell amid heightened trade tensions with China. However, Amazon.com, Inc. (NASDAQ:AMZN) shares could heat back up in July, if past is prologue, and Apple Inc. (NASDAQ:AAPL) stock's pullback could be a rare buying opportunity for bulls.
Amazon Stock Tends to Muscle Higher in July
Amazon stock yesterday dropped 3.06%, marking its worst session since late April. While the equity's losses weren't as steep as fellow FAANG member Netflix (NFLX), AMZN still closed below its 20-day moving average for the first time in more than two months. However, if recent history is indicator, AMZN stock could rally north of its June 21 all-time high of $1,763.10 soon.
The security has been among the best stocks to own in July, looking back 10 years. Specifically, AMZN has ended the month higher 90% of the time, averaging a gain of 6.19%, per data from Schaeffer's Senior Quantitative Analyst Rocky White. At last check, the shares were 1.6% higher at $1,689.53. Another 6.19% pop from current levels would put Amazon stock around $1,794.11 -- in uncharted territory.
What's more, AMZN is now within one standard deviation of its 40-day moving average, after a lengthy stretch above this trendline. Since 2008, there have been 14 similar pullbacks to this moving average; a month later Amazon stock was higher 71% of the time, and averaged a healthy gain of nearly 5%.
Options traders hoping to speculate on the equity's short-term trajectory will be happy to know that AMZN has handily exceeded the options market's volatility expectations during the past year. This is indicated by the stock's Schaeffer's Volatility Scorecard (SVS) of 87 out of 100.
Apple Stock Retreats to Support, Key Trendline
Apple stock yesterday marked its lowest close since May 3, as traders considered reports of a potential ban on Chinese investment into U.S. tech. However, the shares found support in the $180 region, which acted as a ceiling earlier this year. The blue chip has surrendered close to 5% since touching a record high of $194.20, but is now within one standard deviation of its 80-day moving average, after a lengthy stretch above it -- a historically bullish signal for AAPL.
Specifically, there have been six similar pullbacks to this trendline, looking back to 2008; AAPL shares were up 3.3%, on average, a month later, per data from White. At last check, Apple stock was up 1.6% at $185.07. Another uptick from current levels would place the Dow stock back north of $191.
Traders looking to speculate on AAPL's near-term direction should consider short-term options, which are relatively attractive right now. The iPhone maker's Schaeffer's Volatility Index (SVI) of 21% is still in just the 28th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations for Apple.