STMicroelectronics N.V. (NYSE:STM) saw a huge pop yesterday, on the back of a major rally for the semiconductor sector. The 4.2% bull gap marked STM's fourth consecutive win and its best day in months, too. The stock is threatening to snap its win streak today though, down 1.8% to trade at $18.02, dampened by broad-market headwinds. What's more, Monday's surge put the stock right in line with a technical signal on the charts, which could imply even more downside for the equity.
Specifically, STM just came within one standard deviation of its 320-day moving average after a lengthy period below the trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, this signal has flashed only once before. However, the stock suffered a 17.95% loss one month later. From where it currently stands, a move of this magnitude would have STM trading right atop its three-month lows at $14.79.
Considering its recent behavior on the charts -- including a year-over-year loss of 14.1% -- a round of analyst downgrades might be in the cards for STM. Right now, the majority of the five in coverage consider it a"strong buy." Plus, the security's consensus 12-month target price of $19.77 represents a level that hasn't been touched since last September.
While shorts are starting to take notice, with short interest rising 4.4% in the last reporting period, there's still plenty of room on the bearish bandwagon. Currently the 5.80 million shares sold short represents a slim 0.6% of the stock's available float, and less than two days of buying power at STM's average pace of trading.
Speculating on STMicroelectronic's next leg down with puts might be an attractive option, too. Right now, the security's Schaeffer's Volatility Index (SVI) of 39% sits in the 30th percentile of its annual range, indicating that near-term option traders are pricing in relatively low volatility expectations.