Time to Strike On Amazon.com, Inc. (AMZN) and Shopify Inc (SHOP)?

Wall Street is wary of new partners Amazon.com, Inc. (AMZN) and Shopify Inc (SHOP)

by Andrea Kramer

Published on Sep 17, 2015 at 12:24 PM

Amazon.com, Inc. (NASDAQ:AMZN) is generating headlines today, after the firm unveiled a $49.99 Fire tablet -- confirming buzz from earlier this month -- as well as a new Fire HD tablet and a new Fire TV. AMZN also picked Shopify Inc (NYSE:SHOP) to help merchants create online stores, sending SHOP shares 20.1% higher to $34.73. What's more, from an Expectational Analysis® perspective, both AMZN and SHOP could be attractive for contrarian bulls.

AMZN was last seen 1.2% higher at $533.78, bringing its year-to-date lead to a stunning 72%. The shares are now trading where they were before the August bloodbath, and if history is any guide, they could be ripe to resume their quest for record highs. 

The stock recently bounced off its 40-day moving average, which has served as support several times in 2015. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, the past seven times this signal has occurred, AMZN has averaged a five-day return of nearly 1.9%, and was higher 71% of the time. What's more, going out 21 days after touching its 40-day trendline, AMZN has been higher a whopping 83% of the time, boasting an average 21-day return of 2.6%.

150917AMZN

What's more, an unwinding of pessimism on Wall Street could add fuel to AMZN's fire. Short interest skyrocketed 28.3% during the most recent reporting period, in fact, underscoring the serious skepticism toward the outperformer.

Meanwhile, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), option buyers haven't initiated bearish bets over bullish at a faster pace during the past year. Specifically, AMZN's 10-day put/call volume ratio sits at an annual high of 1.26.

Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.17 stands higher than more than three-quarters of all other readings from the past year, suggesting near-term option players are more put-heavy than usual. Heavy put open interest resides at the deep out-of-the-money September and October 500 strikes; a mass exodus of bears could propel Amazon.com, Inc. (NASDAQ:AMZN) higher.

Echoing that, SHOP short interest grew 13.7% during the past two reporting periods, and now accounts for 7.6% of the equity's total float. At SHOP's average pace of trading, it would take more than a week to buy back these bearish bets -- plenty of fuel for a short squeeze. Meanwhile, just five analysts follow Shopify Inc (NYSE:SHOP), and all five offer up tepid "hold" opinions -- leaving the door wide open for upgrades or positive initiations to draw more buyers to the table. 


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