The Signal Hinting at an NVIDIA Corporation (NVDA) Rally

NVIDIA Corporation (NASDAQ:NVDA) is set up for gains after bouncing from its 160-day trendline

Jun 18, 2015 at 2:58 PM
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NVIDIA Corporation (NASDAQ:NVDA) options traders have rarely been more bearish than in recent weeks. According to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open twice as many puts as calls in the last 10 sessions. The resultant put/call volume ratio of 2.04 ranks just 3 percentage points from an annual peak.

There's plenty of skepticism elsewhere, too. Fifteen of 21 analysts tracking NVDA consider it a "hold" or worse, and the stock's consensus 12-month price target of $22.42 stands at a slim 2.2% premium to its current perch at $21.92. If that's not enough, despite short interest plummeting 35% during the latest reporting period, it still accounts for a healthy 8.6% of NVDA's float. At average daily trading volumes, it would take shorts more than one week to buy back all their shorted shares.

This is surprising, considering the security has advanced 9.3% year-to-date. What's more, NVDA recently took a bounce off its 160-day moving average, which has historically been bullish. After nine of the last 10 signals, the semiconductor stock has rallied in the ensuing 21 sessions -- averaging a gain of 5.7%. Should history repeat itself, NVIDIA Corporation (NASDAQ:NVDA) could see further upside as option bears, shorts, and skeptical analysts change their tune.

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