The equity has a history of Santa Claus rallies
It's been a rocky road for tech stocks recently, and semiconductors are no exception. While the tech sector is attempting to stage a rebound today, a handful of recently beat-up securities are trading at relative bargains, if history is any indicator. One such stock is KLA-Tencor Corp (NASDAQ:KLAC), which tends to rally in the month of December.
After touching a record high of $110.01 in early November, KLAC stock pulled back to test the round-number $100 region. What's more, the shares found support atop their 10-month moving average -- which hasn't been breached on a monthly closing basis since September 2016 -- and were last seen up 1.8% at $102.65.
Over the past 10 years, the month of December has boded well for KLAC shareholders. The security has averaged a monthly gain of 5.19%, according to Schaeffer's Senior Quantitative Analyst Rocky White. Plus, KLAC is one of only a handful of S&P 500 Index (SPX) stocks that have ended nine of the last 10 Decembers in the black. Another 5.19% rally from November's close would put the shares around $107.55 heading into 2018 -- plenty of upside room from current levels.
Despite the stock's long-term ascent, short sellers have been piling onto KLA-Tencor. Short interest surged more than 47% during the past reporting period, and now accounts for 3.73 million shares. Should December history repeat and KLAC stages a Santa Claus rally, a short squeeze could propel it even higher.
While options volume on the semiconductor stock tends to run light, on an absolute basis, it's worth noting that KLAC sports a Schaeffer's Volatility Scorecard (SVS) of 85. This lofty SVS indicates that the shares have tended to exceed options traders' volatility expectations in the past year -- an encouraging sign for would-be premium buyers.