It's been a rough month for chip stocks, as trade tensions between the U.S. and China ratchet back up. While the sector is getting a respite today on the latest Huawei-related news, one battered semiconductor concern could be ripe for an even bigger rebound: Xilinx, Inc. (NASDAQ:XLNX). Below, we take a look at XLNX stock and explain why now could be time to buy the dip.
Xilinx shares have surrendered more than 13.2% so far in May, pacing for their worst month since July 2014. Heading into today, the security's 14-day Relative Strength Index (RSI) stood at 26 -- well into oversold territory.
However, in the wake of the recent tech sell-off, XLNX just came within one standard deviation of its 200-day moving average, after a lengthy stretch above this trendline. Over the past three years, there have been four similar pullbacks for XLNX, after which the stock was higher a month later each time, per data from Schaeffer's Senior Quantitative Analyst Rocky White. What's more, the equity averaged a one-month gain of 12.09%.
At last check, the equity was up 3.4% to trade at $104.76 -- around where the security landed after a late January bull gap. A similar bounce off the 200-day from current levels would put XLNX shares around $117.43.
Looking at recent options trends reveals a stronger-than-usual affinity for bearish bets of late. XLNX currently sports a 10-day put/call volume ratio of 0.86 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). While this ratio indicates that purchased calls outnumbered puts on an absolute basis in the past two weeks, the ratio registers in the 87th percentile of its annual range, pointing to accelerated put buying during the past two weeks.
However, should Xilinx stock resume its pullback, the shares could find some options-related support. Peak open interest across all series of options stands at the round-number June 100 put, with more than 11,700 contracts outstanding.