2 Chip Stocks Riding Sector Tailwinds

MU and NVDA have very different options activity, though

Managing Editor
Jan 24, 2019 at 2:32 PM
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The Dow and S&P 500 are lower today, but a resurgent tech sector is powering the Nasdaq. Three names moving higher today are chip stocks Micron Technology, Inc. (NASDAQ:MU) and Nvidia Corporation (NASDAQ:NVDA), as well as Square Inc (NYSE:SQ). Below, we'll take a look at what's moving the shares of MU, NVDA, and SQ.

MU Rally Running into Familiar Resistance

Chip stocks are up across the board, as several sector stalwarts such as Xilinx (XLNX) posted impressive quarterly beats. Micron is getting some of that halo lift, too, up 8% to trade at $36.97. MU shares fought back from their Dec. 26 bottom near $28 to add 8% in 2019, although the rally appears to have lost steam at their 80-day moving average.

It's not surprising that amid Micron's recent sell-off, option bears have emerged. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows that MU's 10-day put/call volume ratio of 0.86 ranks in the 87th percentile of its annual range, indicating a much healthier-than-usual appetite for bearish bets of late.

Echoing this, pessimism, MU's Schaeffer's put/call open interest ratio (SOIR) of 1.73 sits in the 100th percentile of its annual range, too, suggesting that short-term option players have rarely been more put-heavy in the past year. 

NVDA Cruising Toward Fifth Straight Weekly Win

Similar to Micron, Nvidia stock is enjoying the chip sector surge today, up 5.6% to trade at $158.03. NVDA has started 2019 off hot, adding 18% year-to-date and heading toward its fifth straight weekly win. 

The picture in Nvidia's options pits looks the opposite of Micron's. ISE/CBOE/PHLX data shows NVDA with a 10-day call/put volume ratio of 2.67, which ranks in the 100th percentile of its annual range.

What's more, its Schaeffer's put/call open interest ratio (SOIR) of 0.71 is in the 1st percentile of its annual range, so short-term option players have rarely been more call-heavy in the past 12 months.

Analyst Sets Lofty Target for SQ

Stepping away from semiconductors, Square stock is up 5.4% to trade at $72.79 today, after Instinet hiked its price target to $110 from $108. This would be new record-high territory for SQ, well past its Oct. 1 peak of $101.15. Despite that lofty bull note, analysts are evenly divided over the stock. Exactly 15 rate it a "hold" or "strong sell," and the other 15 rate it a "buy" or better. 

On the charts, Square stock has gotten off to a red-hot start to 2019, turning in only four negative sessions during the first 15 days. The shares are heading toward their fifth straight weekly win. 


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