Fire Sale on Amazon Stock

AMZN has been an attractive target for shorts recently

Aug 13, 2019 at 1:32 PM
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It's been a rough August for the U.S. stock market, with the tech sector taking a notable hit on escalating U.S.-China trade rhetoric. This weakness may have created buying opportunities among individual names, though, with FAANG stock, Inc. (NASDAQ:AMZN) now trading near a trio of trendlines that have marked attractive entry points for a long trade in the past.

Taking a closer look, AMZN shares topped out at $2,035.80 on July 11, a chip-shot away from their Sept. 4 record high of $2,050.50. The security went on the retreat all the way back to the $1,750 region by early August -- home to its 160-day, 200-day, and 320-day moving averages, which have all had historically bullish implications for Amazon stock, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.

Drilling down on the specific data, there have been six other times in the past three years AMZN has come within one standard deviation of its 160-day trendline after trading above it 60% of the time in the past two months and in eight of the last 10 sessions. Following these previous signals, Amazon shares were up 7.8%, on average, one month out, with 83% of the returns positive.

For the 200-day trendline, there have been four similar signals in the last three years, resulting in an average one-month gain of 4.9%. And in the five times Amazon came within one standard deviation of its 320-day after a lengthy stretch above it over this same time frame, the FAANG stock was 10.4% higher, on average, 21 days later, boasting a 100% win rate. Based on its current perch at $1,823.73, up 2.2% today, another 10% move higher would put AMZN back above $2,000.

A steady stream of short selling likely exacerbated AMZN's retreat from its mid-July peak, with these pessimistic positions up almost 25% in the July 1 through Aug. 1 reporting periods. However, another rally off trendline support could shake some of the weaker bearish hands loose, which could create tailwinds for Amazon.

amzn stock daily price chart on aug 13


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