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Huawei Warning Sparks Accelerated Cohu Put Trading

Karee Venema

Cohu, Inc. (NASDAQ:COHU) stock hit a two-year low of $13.86 earlier, and was last seen down 5% at $14.31. The California-based semiconductor testing firm said last night that recent U.S. restrictions on Chinese tech firm Huawei is hurting its customers' business, and the company will implement a temporary salary reduction program.

The stock is now on track for its fifth straight loss, which will mark its longest losing streak since March. Year-over-year, the shares have surrendered more than 45%, with recent rally attempts contained by their descending 180-day moving average. However, today's decline is stalling out near $14.10 -- a familiar floor for the security since its late-December lows.

Against this backdrop, options volume is running at a quick clip on Cohu stock today. Although still light on an absolute basis, puts are crossing the tape at nine times the average intraday rate. Buy-to-open activity has been detected at the July 10 put, which would suggest speculators expect a drop into single digits by the close next Friday, July 19 -- territory not charted since October 2015.

Short sellers would certainly welcome additional downside. Short interest spiked 12.4% in the most recent reporting period to 1.76 million shares. This represents a healthy 6.3% of COHU's available float, or five times the average daily pace of trading. Continued short selling could increase pressure on the shares.

There's room for analysts to lower their outlooks the underperforming tech stock, too, which could spark more selling. All three covering brokerages maintain a "strong buy" rating on COHU, while the average 12-month price target of $21.17 is a 48% premium to current trading levels.

cohu daily chart july 9