Semiconductor Stock Ready to Bounce Off Bullish Trendline

Semiconductor equipment stock Credo Technology Group (NASDAQ:CRDO) has pulled back to its 50-day moving average, a trendline that historically has yielded bullish returns. This current pullback also coincides with support at $138 that has held up in recent weeks.
 
Shorts may be in covering mode, but with 4.8% of the stock’s total available float sold short, there’s still some contrarian potential. There could be an unwind in the options pits too, per CRDO’s Schaeffer's put/call open interest ratio (SOIR) of 1.00 meaning short-term speculators are more put-heavy than usual toward the stock.

 

The equity's Schaeffer's Volatility Scorecard (SVS) of 90 (out of 100) shows Credo’s strong tendency to make bigger-than-expected moves during the past year, relative to what the options market was pricing in.
 
Our recommended January call has a leverage ratio of 2.9 and will double in value on a 40% increase in the underlying equity.