Semiconductor Stock Could Reach Further Highs

Tailwinds could come from an unwinding of pessimism in the options pits

Digital Content Manager
Mar 2, 2021 at 2:48 PM
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The shares of semiconductor concern Advanced Micro Devices, Inc. (NASDAQ:AMD) are pulling back slightly today, down 0.5% at $85.96 at last check. The equity is currently taking a breather from a Jan. 11, all-time high of $99.23, but remains up 80.7% year-over-year. Investors shouldn't look away just yet, though, as today's drop has helped the security land near a historically bullish trendline, which could push AMD higher in the coming weeks.

Specifically, Advanced Micro Devices stock just came within one standard deviation of its 160-day moving average, after spending several months above this significant trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred in the past three years. The security enjoyed a positive return one month later each time, averaging a whopping 23.9% gain for that period. From its current perch, a move of similar magnitude would put AMD over the $106 mark -- a brand new record peak.

AMD 160-Day

The security could soon benefit from a short squeeze as well. Short interest rose 12.8% in the last two reporting periods, yet the 80.45 million shares sold short still account for 7.5% of the stock's available float. 

An unwinding of pessimism in the options pits may create additional tailwinds for AMD, too. This is per the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.03, which ranks at the 99th percentile of its annual range. In other words, short-term option players have rarely been more put-heavy during the past 12 months.

What's more, AMD options can be had for a bargain at this time. The stock's Schaeffer's Volatility Index (SVI) of 42% sits higher than just 5% of all other readings in its annual range. This means options players are pricing in relatively low volatility expectations at the moment.

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