ARM has rallied past its 80-day moving average this week, and has short squeeze potential
Arm Holdings PLC (NASDAQ:ARM) stock is up 2.8% to trade at $131.72 today. The chipmaker is building off yesterday's 3.5% pop that stemmed from a price-target hike from BofA Global Research to $140 from $135. Thanks to a 20% year-to-date gain and bounce off $100, the stock has cleared a key trendline with bullish implications.
The trendline in question is Arm's 80-day moving average. Per Schaeffer's Senior Quantitative Analyst Rocky White, this “crossover” event has happened two other times during the last ten years, after which the stock was higher one month later both times, averaging an 5.7% pop in that timeframe. From its current perch, a similar move would have the shares testing a short-term ceiling at $140.
A short squeeze could also fuel tailwinds. Short interest fell 11.7% in the most recent reporting period, yet the 15.34 million shares sold short account for 11.2% of the stock's total available float.
ARM has tended to outperform traders' volatility expectations during the past year, per its Schaeffer's Volatility Scorecard (SVS) of 91 out of 100. Plus, its Schaeffer’s Volatility Index (SVI) sits in the 24th percentile of annual readings, indicating options are affordable.