A pullback to its 40-day moving average could bode well for the equity
China-based e-tailer Vipshop Holdings Ltd (NYSE:VIPS) has been enjoying a virtually non-stop rally this past year, culminating in a four-year high of $24.01 on Aug. 6, with upwards guidance from its 120-day moving average. While the stock has cooled since last week's peak, it just pulled back to another supportive trendline, which has historically pointed to more upside on the charts.
The trendline in question is VIPS' 40-day moving average, which just showed up on a study from Schaeffer's Senior Quantitative Analyst Rocky White. According to White's numbers, there have been seven similar signals in the past three years. One month after 50% of these signals, VIPS was higher, averaging a one-month gain of 4.8%. A similar move from the stock's current perch of $22.56 would put it at $23.64 -- back within a chip shot of its record highs.
It should be noted that Vipshop is preparing to enter the earnings confessional next week on Wednesday, Aug. 19 before the open. A look at the equity's earnings history going back two years shows some impressive next-day gains. In fact, VIPS saw positive returns the day after five of these last eight sessions, including an impressive 27% bull gap after its March report. This time around, the options pits are pricing in a 14.5% next-day move for VIPS, coming in slightly higher than the 9.2% swing the stock has averaged during the past two years, regardless of direction.
Sentiment surrounding VIPS ahead of the event is incredibly optimistic. A whopping 17.25 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- topping all other readings from the past year. Plus, all but one covering analyst considers the stock a "strong buy."