Signals Say Don’t Sweat The Amazon Stock Slide

FAANG stock (AMZN) raised some eyebrows this morning after an SEC filing revealed CEO Jeff Bezos sold $2.8 billion worth of Amazon shares last week. AMZN has managed to shake off the news to test positive territory, trying to snap an eight-day losing streak. Despite the optics of such a sharp pullback, Amazon stock has now settled near two trendlines that could have bullish implications, if history is any guide.

More specifically, AMZN has pulled back to support at its 320-day moving average, after a lengthy stretch above it. There have been four similar pullbacks to this moving average in the last three years, after which the equity was higher 10 days later by 10.4%, on average, per data from Schaeffer’s Senior Quantitative Analyst Rocky White, with all four of the returns positive. Plus, more data from White shows that Amazon stock also just came within one standard deviation of its 200-day moving average after a lengthy stretch atop the trendline. According to this data, three similar pullbacks have been made by the security in the last three years. One month later, the stock was higher 67% of the time, averaging a modest 5% gain.


From AMZN’s current perch at $1,758.51, a 10% pop would put it just south of the $1,950 level, essentially erasing the damage from its current losing streak and reclaiming its 12-month breakeven point. And just above that is the shares’ Sept. 4 all-time high of $2,050.50. Plus, the security’s 14-day Relative Strength Index (RSI) of 25 sits firmly in oversold territory, further fueling speculation that a rally is imminent.

The options pits have been a bit more pessimistic lately. While call volume has been heavier on an absolute basis during the last 10 days on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock’s 10-day put/call volume ratio of 0.91 sits in the 87th percentile of its annual range. This means AMZN puts were purchased over calls at a much quicker clip than usual the last two weeks. Plus, its 30-day IV skew of 17.8% registers in the 95th percentile of its 12-month range, suggesting puts are more pricey than their call counterparts, from a volatility perspective.


Author: Lili