Semiconductor Stock Could Soon Surpass Record Highs

UMC looks poised to stage a rebound

Deputy Editor
Sep 29, 2021 at 2:02 PM
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Taiwan-based United Microelectronics Corp (NYSE:UMC) stock has been chopping lower since its Sept. 3 record high of $12.61. Today, UMC is down 1.8% to trade at $11.32 at last check, and on pace for its third-straight daily loss. However, there is still reason to believe that the equity will add to its 34.3% year-to-date gains. 

More specifically, the equity just came into contact with its 40-day moving average, after spending a significant period of time above it. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, nine similar signals have occurred in the past three years. United Microelectronics stock enjoyed a positive return one-month return in 88% of those cases, averaging a 19% gain. From its current perch, a similar move would send UMC to fresh highs. 

UMC 0929

An unwinding of pessimism in the options pits could provide tailwinds as well. The security's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 96% of readings in its annual range. In other words, options traders have been picking up puts at a much faster-than-usual rate over the last two weeks. Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.06, sits higher than all other readings from the past year, meaning short-term options traders have rarely been more put-biased.

Plus, now looks like a good time to weigh in on UMC's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 45% stands higher than just 7% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 

 

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