Microchip Technology Stock Could Enjoy Tailwinds

Microchip Technology stock has found support atop its 40-day moving average

Jun 20, 2017 at 10:02 AM
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Shares of Microchip Technology Inc. (NASDAQ:MCHP) certainly haven't missed out on the broader rally in semiconductor stocks over the past year. In fact, MCHP sports a year-over-year lead of 56%, including a nearly 27% gain in 2017. While the stock has pulled back from its record highs during the recent tech-sector retreat, it's found solid support from its 40-day moving average.

mchp chart june 16

Microchip Technology's upside potential looks even better when you consider a large batch of June 85 calls just expired. Other options data adds to MCHP's bullish prospects, as well. For example, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.65 ranks in the high 82nd annual percentile. This suggests short-term options traders have been more attracted to puts than normal, and a regression to the norm could result in tailwinds for the shares.

It's also a good time to target near-term options on Microchip Technology. This is according to the stock's Schaeffer's Volatility Index (SVI) of 23%, which happens to land in the low 23rd annual percentile. This indicates low volatility expectations are price into short-term options. Additionally, our recommended call option has a leverage ratio of 6.7, and will double in value on a 14.2% gain in the underlying shares.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this MCHP commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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