Is Cirrus Logic, Inc. (CRUS) Bound to Bounce?

Cirrus Logic, Inc. (NASDAQ:CRUS) could rally hard off its 40-day moving average

Mar 24, 2016 at 10:36 AM
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Cirrus Logic, Inc. (NASDAQ:CRUS) may be down 2.5% today at $33.70, but it's been flying high since its January lows near $25. Plus, based on what we're seeing on the charts -- as well as in the options pits -- the Apple Inc. (NASDAQ:AAPL) supplier may have fuel left in the tank.

Turning to the technicals, CRUS is currently flirting with its 40-day moving average. Historically speaking, this has tended to be a bullish signal over the past three years. During that time frame, the semiconductor stock has touched the trendline seven times, and it's been higher in five instances in the ensuing 21 sessions -- with an average return just over 1%.

What could add to CRUS' bullish case is the backdrop of skepticism witnessed in the options arena. During the last 10 weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open more than twice as many puts as calls. The resultant put/call volume ratio of 2.08 rests just 8 percentage points from an annual peak.

Underscoring this preference for puts over calls is CRUS' Schaeffer's put/call open interest ratio (SOIR) of 2.05, which reveals puts more than double calls among options set to expire in the next three months. More significantly, this SOIR ranks at the top of its annual range, suggesting the prevailing put bias has never been greater in the previous 52 weeks. Long story short, if CRUS bounces from its 40-day moving average, a capitulation among option bears could result in tailwinds.

Even outside of the options pits, skepticism can be detected. Despite falling 8.5% during the last two reporting periods, short interest still accounts for 9% of Cirrus Logic, Inc.'s (NASDAQ:CRUS) float. This translates to nearly one week's worth of pent-up buying power, at the stock's typical daily trading volume.

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