AMZN Bears May Want to Buckle Up

Amazon stock just flashed a reliable buy signal

Managing Editor
Sep 23, 2019 at 1:13 PM
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Online powerhouse Amazon.com, Inc. (NASDAQ:AMZN) is sinking in afternoon trading, last seen down 0.8% at $1,779.59. However, the stock's recent pullback may be a buy signal for AMZN traders, as data from Schaeffer's Senior Quantitative Analyst Rocky White suggests the FAANG leader may be ready for its next surge higher. 

Specifically, Amazon stock has pulled back to within one standard deviation of its 320-day moving average, which has proven to act as support in the past three years. Per White, there have been five similar tests of support at this trendline over that time frame, resulting in an average 21-day gain of 8.8%, with all returns positive. This includes a surge the stock saw after a dip below the trendline in late June. Another 8.8% pop from current levels would catapult the shares back above $1,936 for the first time since late July.

Daily AMZN with 320MA

Looking at the stock's long-term trading history, AMZN has had a volatile run on the charts. Pullbacks have been contained by the aforementioned 320-day, while the $1,750 level acted as a floor during the month of August. Still, Amazon stock has added 32% over the past nine months, and touched a record high of $2,035.80 this past July.

In terms of analyst attention, the security has seen overwhelming support, with 27 of the 28 covering firms sporting a "buy" or "strong buy" recommendation. Plus, the stock's average 12-month price target comes in at $2,303.14 -- a 29% upside to current levels, and in uncharted territory.

Meanwhile, data from the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and and NASDAQ OMX PHLX (PHLX) points to a bullish stance among option buyers as well. The security's 10-day call/put volume ratio of 1.29 ranks in the 78th annual percentile, indicating calls have been purchased over puts at a faster-than-usual clip in the past two weeks.

Lastly, short-term premiums look attractive on Amazon stock at the moment. This is per the e-tailer's Schaeffer's Volatility Index (SVI) of 22%, which ranks in the 12th percentile of its annual range. In other terms, short-term options are relatively cheap, from a historical volatility perspective. 

 

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