One Off-the-Grid FAANG Moving Average to Watch

AMZN has pulled back to a familiar level of long-term support

Managing Editor
Nov 15, 2018 at 12:23 PM
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Lost in all the hubbub surrounding the location of the company's second headquarters, Amazon.com, Inc. (NASDAQ:AMZN) shares have been struggling on the charts. Today, the FAANG stock is down 2.4% to trade at $1,548.92 -- on track for its sixth straight loss, which would mark its longest losing streak since March 2016. However, now may be the time to buy the dip, as AMZN just sent up an under-the-radar buy signal, based on one long-term moving average.

Specifically, AMZN is now trading within one standard deviation of its 52-week moving average. According to Schaeffer's Senior Quantitative Analyst Rocky White, in the 13 other times the shares pulled back to test support at this moving average after a prolonged period of trading above it, the stock was up an average 7.82% a month later. And three months out, AMZN averaged a gain of 14.4%, with 77% of those returns positive.

Daily Stock Chart AMZN

A move higher of similar magnitude over the next three months would help erase the damage done during this recent skid. Plus, despite this and the stock's more than 20% tumble in October, AMZN still boasts a 34% lead in 2018, and has overwhelming support in the analyst community, with 29 of 31 analysts rating it a "buy" or better.

Those wanting to bet on a big bounce for the FAANG stock may want to consider an options buying strategy, as Amazon has been a strong target for anyone buying premium. This is per the stock's Schaeffer's Volatility Scorecard (SVS) of 98 out of a possible 100, which indicates that AMZN has tended to make outsized moves over the past year, relative to what the options market has priced in.

 

 

 

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