Semiconductor Sell-Off Could be Good News for This Chip Stock

CY stock could be flashing 'buy,' if past is prologue

Managing Editor
Aug 17, 2018 at 12:10 PM
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Chip stock Cypress Semiconductor Corporation (NASDAQ:CY) is down 0.6% at $15.84 in afternoon trading, falling alongside sector peers Nvidia (NVDA) and Applied Materials (AMAT) in today's semiconductor sell-off. Shares of CY have pulled back since their post-earnings high in late July, but according to Schaeffer's Senior Quantitative Analyst Rocky White, now may be the time to buy the dip on this semiconductor. 

Longer-term, Cypress stock has spent most of the past year bouncing between support in the $14.50-$15.50 area -- home to its year-to-date breakeven -- and resistance in the $17.50-$18.50 region. Further, the last few pullbacks have been contained by CY's 320-day moving average.

Daily Chart of CY with 320MA

Cypress stock is now within one standard deviation of its 320-day moving average, after a lengthy stretch above this trendline. There have been four similar pullbacks for CY in the past, after which the stock went on to average a one-month gain of 9.9%, boasting a 100% win rate, per White. A move of this magnitude would put the chip stock above $17.40.

Plus, now may be a good time for near-term traders to jump onto Cypress stock with options. This is per the semiconductor's Schaeffer's Volatility Index (SVI) of 32%, which ranks in the low 22nd percentile of its annual range. In other words, muted volatility expectations have been priced into short-term CY options.

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