Signals heard from radio frequency stock
06/15/18

It was more than a month in the making, but for traders who were looking for mobile-tech company Qorvo (QRVO) to extend its May rally, yesterday’s trading range breakout had to be a welcome sight.

Qorvo’s 4%-plus surge yesterday (to around $84) seemed to break a bull-bear stalemate dating back to around May 10, and pushed the stock out of its consolidation the same way it entered it—with upside momentum. The move took shares to their highest level since mid-March and set up the possibility of a challenge to the all-time highs above $88:

Qorvo (QRVO), 3/2/18 – 6/14/18. Range breakout.

Source: OptionsHouse

The recent trading range formed in the wake of a five-day, 21% explosion in early May amid Qorvo’s sixth-straight estimate-beating earnings release and signs of improved Chinese demand.1 (The big up-gap in early February occurred after news the company had inked a big contract with Apple.2)

Yesterday’s jump followed news that…well, there wasn’t any news yesterday, so perhaps the breakout  reflected pent-up demand from the extended consolidation and broader tech enthusiasm. (Or, perhaps because of news we’ll hear about tomorrow?) But in addition to gobbling up QRVO shares, traders were also busy on the options side, as QRVO call options volume was more than twice its daily average less than an hour into the trading session, and the ratio of calls to puts was more than 50:1:

Qorvo (QRVO) call/put ratio, 6/14/18. Nearly 51 calls for every put.

Source: OptionsHouse

Qorvo is often lumped generically into the semiconductor space, but it’s a leader in radio frequency (RF) tech used in phones and other mobile gadgets, as well as in defense, aerospace, and infrastructure applications. (The company was the result of a 2014 merger between RF Micro Devices and TriQuint Technologies.) Qorvo is also a leader in the gallium nitride (GaN) technology that is expected to be critical to the next-generation (5G) wireless technology,3 and it’s been lauded recently for being well-positioned in the ever-expanding “Internet of Things” (IoT) market.4

Those are long-view considerations. The short-term outlook will hinge on the stock’s ability to sustain the breakout—without reversing below the bottom of the trading range—and push to the March high, which the following weekly chart shows is the top of a very broad, long-term consolidation just a bit below the 2015 record high of $88.35.

Qorvo (QRVO), 2/16/15 – 6/14/18. The macro range.

Source: OptionsHouse

With tech back in the driver’s seat for the time being—yesterday the Nasdaq 100 (NDX) hit new all-time intraday and closing highs—some short-term traders will look for QRVO to benefit from those tailwinds. If they last long enough—that is, if tech is indeed breaking out and not just establishing a new swing high—Qorvo could be sailing out of another range before too long.

Market Mover Update: Casey’s General Stores (CASY), which plunged 6% intraday on earnings Tuesday but rebounded to close up and then followed up with a strong rally on Wednesday, saw a big drop in its implied volatility (IV). Yesterday a LiveAction scan showed CASY options IV was more than 41% lower than a week earlier (below). Since lower IV means (all else being equal) lower options prices, some traders may be looking to buy relatively underpriced options to position themselves for further action in CASY.

Casey’s General Stores (CASY), LiveAction scan, 6/14/18. Low IV, cheap options?

Source: OptionsHouse

 

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1 Zack’s. Qorvo (QRVO) Beats on Q4 Earnings, China Demand Improves. 5/3/18.

2 Investor’s Business Daily. Qorvo Stock Rockets On Apple Contract Win, Broadcom Slips. 2/1/18.

3 The Motley Fool. Qorvo Investors Shouldn’t Miss the Big Picture. 5/23/18.

4 The Street. 6 Chipmakers Poised to Benefit From the Internet of Things' Massive Growth. 6/12/18.