Semiconductor Stock Primed for Another Rebound

Now looks like an opportune time to weigh in on UMC's next move with options

Digital Content Manager
Oct 25, 2021 at 1:42 PM
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The shares of United Microelectronics Corp (NYSE:UMC) are up 2.6% at $10.52 at last check, as the stock slowly start to dig itself out of its September trough, and subsequent middling price action for the majority of October. While the security's 80-day moving average has kept a lid on shares for most of the month, a historically bullish trendline has emerged just below that could help UMC break higher in November.

According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, UMC just came back within one standard deviation of its 160-day moving average after a lengthy period above the trendline. The chip stock has seen five similar signals over the past three years. One month after each of these signals, the stock was higher, averaging an impressive 21.6% return during this time period. A similar move from its current perch would put UMC at $12.76, marking a fresh high for the equity. 

umc chart oct 25

An unwinding of pessimism among options traders could propel UMC higher, too. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.81 stands higher than all other readings from the past year. This implies these short-term options players haven't been more put-biased in the past year. 

Echoing this, the stock's 10-day put/call volume ratio of 8.97 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands in the top-most percentile of its annual range. In other words, long puts haven't been more popular during the past 12 months. 

Now looks like an ideal time to weigh in on UMC's next move with options, too. The security's Schaeffer's Volatility Index (SVI) of 44% sits in the extremely low 6th percentile of its 12-month range, suggesting options traders are pricing in relatively low volatility expectations for the time being. 



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