BZUN 80-day pullbacks have marked major buying opportunities in the past
China-based e-commerce solutions provider Baozun Inc (NASDAQ:BZUN) has been marching higher on the charts in 2018. The U.S.-traded shares have gained more than 75% year-to-date, easily outperforming the major equity benchmarks. And while BZUN stock has pulled back from its mid-June peak north of $67, data from Schaeffer's Senior Quantitative Analyst Rocky White suggests that this dip could be an ideal buying opportunity for bulls looking to join the "Shopify of China" on its next leg higher.
Specifically, White looked back at previous instances where BZUN pulled back to within one standard deviation of its 80-day moving average after having spent the majority of the previous two months trading above it. Over the past three years -- a time span that encompasses nearly all of the stock's U.S. trading history -- there have been seven such occurrences.
Looking at the returns 21 days after each signal, BZUN was trading higher 100% of the time, with a fairly staggering average return of 29.21%. Another rally of this magnitude over the next month would propel Baozun stock up above $71, into previously uncharted territory. BZUN was down 0.07% at $55.29, at last check.
It's also worth noting that the 80-day moving average is currently positioned just north of the $52 level. This region acted as resistance in March and April, but has since switched roles to contain BZUN's lows through May and June.
Following this latest 80-day buy signal from Baozun, a rush to cover among short sellers could contribute to short-term upside. There are 5.76 million shares sold short, which accounts for a healthy 16.6% of the equity's float. A capitulation by these bears should provide tailwinds as BZUN stages another trendline bounce.
Plus, now is an ideal time to buy short-term options premium on BZUN. The stock's Schaeffer's Volatility Index (SVI) of 57% registers in the low 20th percentile of its annual range, which means front-month bets have priced in lower volatility expectations only 20% of the time in the past year.