Buy This Semiconductor Stock In December

Nvidia stock could hit higher highs next month, if past is prologue

Managing Editor
Nov 28, 2017 at 12:15 PM
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December is right around the corner, with the Dow and S&P on pace to end an eighth straight month in the black. One stock that historically outperforms in December is semiconductor concern NVIDIA Corporation (NASDAQ:NVDA)  Here's a closer look at NVDA stock's performance lately, and how analysts and options traders have been playing the chip stock.

According to data from Schaeffer's Senior Quantitative Analyst Rocky White, NVDA has averaged a December gain of 8.12% over the last 10 years, and has been positive eight out of 10 months. That represents the second-best average return of all S&P 500 stocks.

Best Stocks In December

Although Nvidia stock is down 1.3% to trade at $211.26 today, it has been an overall outstanding year for the equity. NVDA has tacked on 98% in 2017, and touched an all-time high of  $218.67 on Nov. 10. The shares' rising 20-day moving average has provided support since mid-September, guiding the stock on a path of higher highs to more than double its 2017 low. From current levels, another 8.12% rally next month would place the shares around $228.41 -- well into new-high territory.

Despite NVDA's surge up the charts, analysts remain skeptical. Of the 26 brokerages covering the chip name, 13 rate it a tepid "hold" or "strong sell." Continued technical outperformance could prompt analysts to re-evaluate their downbeat outlooks.

In the options pits, speculators have taken a seemingly bearish tone in recent weeks. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.23 ranks in the 91st percentile of its annual range, pointing toward an unusually high put-skew among near-term options traders. If past is precedent and NVDA rallies in December, it could lead to an unwinding of these bearish bets.

The good news for options traders is that Nvidia's Schaeffer's Volatility Index (SVI) of 28% ranks in the low 4th percentile of its annual range, indicating near-term volatility expectations for NVDA are unusually low at the moment. Furthermore, NVDA stock has a Schaeffer's Volatility Scorecard (SVS) of 99, indicating the shares have handily exceeded options traders' volatility expectations in the past year.

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