Don't Sweat This Tech Stock's Latest Pullback

Options look like an attractive route to weigh in on SE

Deputy Editor
May 4, 2023 at 1:41 PM
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The shares of Singapore-based tech name Sea Ltd (NYSE:SE) are slightly higher today, last seen up 1.2% to trade at $75.50. Though seemingly lacking a catalyst, today's climb could be the beginning of a rally, given the equity's placement near a historically bullish trendline.
 
Specifically, Sea stock just pulled back to its 80-day moving average, after spending a significant period of time above it. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals occurred during the past three years, with SE seeing a 7.6% one-month gain 75% of the time. From its current perch, a similar move would put the equity back above the $81 level.

 

SE Chart May 32023

On a year-over-year basis, Sea stock is underperforming, down 16.5%. However, SE recently found a floor at the $73 area. It's also worth noting the equity's Relative Strength Index (RSI) of 21.5 is in "oversold" territory, indicating a short-term bounce may be in the cards. 

An unwinding of options traders' pessimism could also bode well for SE. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 10-day put/call volume ratio that stands higher than 75% of readings from the past year. This suggests puts have been more popular than usual over the last two weeks. 

Now looks like a good time to weigh in on Sea stock's next move with options. Its Schaeffer's Volatility Index (SVI) of 80% stands in the relatively low 28th percentile of annual readings, implying options players are pricing in relatively low volatility expectations at the moment. 

 

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