Climbing Ambarella Shares Could Cool Off

AMBA's near-term options are inexpensive right now

Managing Editor
Mar 14, 2019 at 1:49 PM
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GoPro (GPRO) supplier Ambarella Inc (NASDAQ:AMBA) has been climbing higher on the charts, now up 46% from its Nov. 20 four-year low of $30. However, one technical signal indicates AMBA's upside momentum could cool off in the near future.

At last glance, Ambarella stock was trading flat, just above $43.80. Digging deeper, AMBA is now trading within one standard deviation of its 80-week moving average, after a lengthy stretch below this trendline. The stock has made similar run-ups seven times in the past 15 years, shedding 6.1%, on average, one month out, per Schaeffer's Senior Quantitative Analyst Rocky White. Another plunge of this magnitude would put AMBA stock just above $41.

Weekly Chart of AMBA with 80MA

Switching to options data, AMBA traders are more call-heavy than usual right now. This is per the security's Schaeffer's put/call open interest ratio (SOIR) of 0.22, in the 12th annual percentile, suggesting near-term call open interest exceeds put open interest by a much wider-than-usual margin. Should AMBA once again retreat in the face of its 80-week trendline, an exodus of option bulls could weigh on the shares.

In closing, it may be a good time for traders to speculate on Ambarella stock's near-term trajectory with options. The tech name's Schaeffer's Volatility Index (SVI) of 38% ranks in the 2nd annual percentile, meaning short-term options are extremely cheap at the moment, from a historical volatility perspective.


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