The stock has bounced from the supportive 40-day trendline in the past
Shares of Amazon.com, Inc. (NASDAQ:AMZN) -- which will sell live Christmas trees this year -- are slightly lower in afternoon trading, last seen down 0.2% at $1,984. Weighing on the shares is a tech sector swoon, as well as concerns ahead of a Senate committee hearing on consumer data privacy, slated for Sept. 26. Below we will take a look at how AMZN has been faring on the charts, and why now may be a good time to bet on the FAANG stock's next leg higher.
It's no secret that Amazon stock has been a long-term outperformer on the charts, with the stock most recently touching a fresh record high of $2,050.50 on Sept. 4 -- just as it briefly surpassed its $1 trillion market cap. The online powerhouse has roughly doubled over the past 12 months, with recent pullbacks contained by its rising 40-day moving average.
In fact, Amazon stock is now within one standard deviation of its 40-day moving average. Over the past three years, there have been 14 prior instances of AMZN pulling back to this trendline after closing north of it at least 60% of the time during the previous two months and in eight of the last 10 trading days. Those prior pullbacks have resulted in an average one-month return of 4.92% for AMZN, per data from Schaeffer's Senior Quantitative Analyst Rocky White, with 71% of those returns positive. A similar pop from current levels would place the FAANG shares around $2,081 -- in record-high territory.
Plus, now seems to be an attractive time for near-term traders to hop onto AMZN with options. This is based on the security's Schaeffer's Volatility Index (SVI) of 25%, which sits just 24 percentage points from an annual bottom, indicating low volatility expectations are being priced into short-term contracts.
Lastly, Amazon stock has constantly rewarded premium buyers during the past year. This is per its Schaeffer's Volatility Scorecard (SVS) of 92 out of 100, which shows the security has tended to make much bigger-than-expected moves on the charts compared to what the options market was expecting.