Bull Signal Flashing on Semiconductor Stock

STMicroelectronics stock boasts cheap options as well

Deputy Editor
Aug 17, 2020 at 12:38 PM
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The shares of semiconductor specialist STMicroelectronics (NYSE:STM) are on the rise this afternoon, up 2.4% at $29.81 at last check. However, longer term STM just pulled back to a trendline with historically bullish implications, which could propel the equity back toward its February 14, two-decade high of $31.98.

Specifically, STM just came within one standard deviation of its 40-day moving average, after a lengthy stretch above this trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred during the past three years. STMicroelectronics stock was higher one month after 67% of these signals, averaging a one-month return of 5.9%. A similar move, from the security's current perch, would put STM near $32, which marks a level the equity hasn't reached since mid-February.

STM Chart August 17

Meanwhile, the options pits have been incredibly bullish lately. In fact, STM sports a 10-day call/put volume ratio of 89.91 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio stands higher than 86% of readings from the past year, showing calls are being picked up at a much faster-than-usual clip. 

Those looking to bet on STMicroelectronic stock's next move should to consider options. The equity's Schaeffer's Volatility Index (SVI) of 44% stands higher than just 16% of all other readings from the past 12 months. This implies options traders have been pricing in relatively low volatility expectations at the moment. 

 

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