Previous pullbacks to its 200-day moving average have preceded rallies
Apple suppliers will continue to grab headlines leading up to Apple's WWDC event in two weeks. However, there are other semiconductor stocks out there to target in the meantime. Cypress Semiconductor Corporation (NASDAQ:CY) stock is throwing up a significant bullish signal, in fact, and options are attractively priced to boot.
Cypress Semiconductor stock has given back 13% since climbing to a six-year high of $18.87 on March 13. The shares' recent attempts to dig out of that hole were met with resistance at the $16.50 level and a prompt pullback to their 200-day moving average. However, this could have bullish implications for the stock based on previous signals, and now may be the time to buy the CY dip.
Over the past three years, there have been eight occasions where CY has come within one standard deviation of its 200-day moving average after an extended stint above this trendline, according to Schaeffer's Senior Quantitative Analyst Rocky White. One month later, the security was higher all eight times, averaging a return of 12.73%. A bounce of similar proportion off its current perch of $16.32 would put CY stock around $18.40 -- back within a chip-shot of multi-year highs.
In the options pits, the attitude has been quite bearish recently. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.51 ranks 4 percentage points from an annual high. While the ratio shows that calls are preferred on an absolute basis, puts have been bought to open at a much faster-than-usual clip during the past two weeks. Should CY rally once again, an unwinding of these bearish bets could nudge CY higher.
And those wanting to bet on more upside for the chip stock can pick up near-term options at a relative bargain. The equity's Schaeffer's Volatility Index (SVI) of 29% ranks in the 13th percentile of its annual range, indicating premium on short-term contracts is relatively cheap at the moment, from a volatility standpoint.