The equities could buck the broader sluggish summer trend, if past is prologue
Semiconductor stocks could buck the broader sluggish summer trend by making bigger-than-usual price swings, if recent history is any indicator. Schaeffer's Senior Quantitative Analyst Rocky White recently identified stocks that tend to be most volatile in the June-August period, looking at their standard deviation of returns over the past 10 years. On the list were chip stocks Micron Technology, Inc. (NASDAQ:MU), Nvidia Corporation (NASDAQ:NVDA), and Advanced Micro Devices, Inc. (NASDAQ:AMD).
MU Stock Explores Dot-Com-Boom Territory
Micron stock earlier today peaked at $64.66 -- territory not explored since 2000 -- before pulling back, and was last seen 1.1% lower at $61.96. MU shares have been on fire since the company last week announced a $10 billion stock buyback plan and upped its current-quarter earnings guidance. As such, the equity's 14-day Relative Strength Index (RSI) yesterday moved into overbought territory north of 70, suggesting today's breather may have been in the cards.
However, Micron stock tends to slip in the summer months. Looking back 10 years, the equity has averaged a loss of 4.4% in June through August, and has been higher just 60% of the time.
And again, MU has been one of the most volatile S&P stocks, too -- fourth on our list overall. Echoing this, the security's Schaeffer's Volatility Scorecard (SVS) sits at 85 out of 100, indicating MU shares have handily exceeded options traders' volatility expectations in the past year. As such, short-term traders may want to consider a volatility-based options strategy like the straddle or strangle.
NVDA Has Exceeded Options Traders' Volatility Expectations
Nvidia stock touched a record high of $260.50 on May 10, following a blowout earnings report. Since then, NVDA shares have consolidated their gains in the $240-$250 region, and were last seen up 1% at $251.10. Still, the equity is up more than 11% in May -- set for its best month since January -- and has added more than 73% in the past year.
Over the past 10 years, NVDA has ended the June-August period higher 70% of the time. The equity's average return during this period is negative 0.48%, but that doesn't mean the stock will remain sideways this summer; as alluded to earlier, Nvidia stock is also on our list of stocks that tend to be volatile during this period. Further, the security's SVS sits at a lofty 90, underscoring NVDA's ability to make bigger moves on the charts than its options price in.
It should also be noted that NVDA's short-term options are attractively priced right now. The stock's Schaeffer's Volatility Index (SVI) of 32% sits in just the 10th percentile of its annual range, indicating relatively low volatility expectations are, in fact, being priced into near-term contracts.
AMD Stock Tends to Cool Off in the Summer
Advanced Micro Devices stock was last seen 2.7% higher at $13.72. The shares are 1.5% higher so far this week -- defying a recent history of slumping after Memorial Day. AMD stock is still staring up at familiar resistance in the $13.75-$14.50 area, however, which has stifled the equity's momentum for most of the past year. Plus, the stock's 14-day RSI is now in overbought territory, hinting that a short-term pullback could be on the horizon.
On our list of most volatile summer stocks, however, AMD tends to fare the worst. The equity has averaged a June-August loss of 6.37%, looking back 10 years, and has ended the period in the black just 30% of the time.
Options traders looking to speculate on another summer slump for Advanced Micro Devices shares can pick up premiums at a relative discount. The security's SVI of 39% is higher than just 9% of all other readings from the past 12 months.