We now live in a highly technical world and it’s getting more dependent on technology at an exponential rate. Cypress Semiconductor Corporation (NASDAQ:CY) is a supplier to the back bones that makes this transition happen. With the advent of self-driving cars, the cloud and whatever other trends the future holds, I believe that there is room for it and all its competitors to thrive in this digital age.
CY stock is definitely not cheap, but that goes for the rest of the sector. Analyst expectations are spread across three ratings, so I see no unusual risk of surprise downgrades.
Cypress stock is now 40% higher than a year ago. But it has had its ups and downs. But for the past three months, CY managed to hold the $13 as support. So for the near term, this is the pivot I watch.
Click to Enlarge Technically, the bears could argue that CY has been setting lower highs and bumping atop a floorboard. If the board breaks then price could overshoot 7% lower. The bulls have so far held the support level solid.
If they continue to do so, it’s likely that they can use it as a base to remount another rally toward $14 or higher.
That said, I don’t want to risk $13.4 and hope that we get the rally in CY stock … instead, I want to generate income from selling downside risk. To do that, I need to find levels where price is not likely to go.
If the $13 pivot fails, the next level of interest would be $12.30, which had served as pivot prior to January of this year and as far back as five years ago. So I can safely say that the $12/$13 zone is important to both sides and neither bulls nor bears are likely to let it go without a fight. This creates a stalemate in CY, which is perfect for selling premium.
My thesis today is that I bet that CY will be able to hold the aforementioned pivot level. And if not, then I am willing to own the shares at much lower than current levels. Think of it as getting paid for an opportunity to buy CY shares at a heavy discount off today’s price.