Chip Stock Poised for Its Next Leg Higher

The 40-day moving average has boded well for NXPI several times in the past

Deputy Editor
Apr 21, 2021 at 1:32 PM
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The shares of NXP Semiconductors NV (NASDAQ:NXPI) have had quite a year on the charts, chopping higher since their March 2020 trough, and more than doubling in the past 12 months. While the security has suffered plenty of pullbacks along the way, several layers of support, including the 60- and 80-day moving averages, have kept significant losses in check. And though the security has been in selloff mode this month, after hitting a fresh all-time high of $216.43 on April 5, a new layer of support has just emerged, and its one that has been historically bullish for NXPI. 

Specifically, NXPI just pulled back to its 40-day moving average after a lengthy period above the trendline, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. White's study shows the security coming within one standard deviation of this key level 15 other times within the past three years, with positive one-month returns 79% of the time. NXP Semiconductors stock averaged a 6.1% pop one month after these signals. From its current perch at $199.01, a similar move would put the stock at $211.15 -- well on its way to reclaiming its early April peak. 

NXPI Apr 21

The firm is set to share its first-quarter earnings results after the close on Monday, April 26, which could also help move shares. The stock has a history of positive post-earnings moves, with all but two of its last eight post-earnings sessions ending higher. Over the past two years, NXPI has averaged a post-earnings swing of 3.6%, regardless of direction but this time around the options pits are pricing in a much bigger 6.8% move. 

Option bulls are coming out of  the woodwork ahead of the event, too. So far, 11,000 calls have crossed the tape -- triple the intraday average -- compared to just 930 puts. The two most popular contracts by far are the weekly 4/30 215-strike call and the 200-strike call from the weekly 4/23 series, with positions being opened at the former. This means these traders are expecting even more upside for NXP Semiconductors stock after the company's earning report next week. 

There's still room to get in on NXPI's next move with options. The security's Schaeffer's Volatility Index (SVI) of 38% stands higher than only 11% of readings from the past 12 months. This means options players have been pricing in relatively low volatility expectations at the moment.

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