In the midst of one of its best first-quarter performances on record, the VanEck Vectors Semiconductor ETF (NYSEArca: SMH) traded slightly higher on Tuesday following more bullish analyst commentary on one of the fund’s marquee components.
Shares of NVIDIA Corp. (NASDAQ: NVDA), a top 10 holding in SMH, jumped after Piper Jaffray initiated coverage on the stock with an Overweight rating and a $200 price target, implying significant upside from current levels.
Semiconductor stocks and sector-related ETFs have bounced back as tensions between the U.S. and China eased, the Wall Street Journal reports. The segment, though, is not out of the woods yet as the two countries hammer out the finer details on more delicate subjects, such as intellectual property, technology, cybersecurity, currency, agriculture and energy.
“Nvidia stock has now added 45% since its intraday low of $124.46 on Dec. 26, and has turned in only three weekly losses in that time span. Today’s surge has the shares on track for another test of the $185 level, home to their late-October lows and last week’s highs,” according to Schaeffer’s Investment Research.
More On NVIDIA
Up more than 30% this year, NVIDIA would need to surge almost 40% to reclaim its 52-week high. At the end of February, the stock was the sixth-largest holding in SMH at a weight of 5.20%, according to VanEck data. Intel Corp. (NASDAQ: INTC) is SMH’s largest holding at a weight of 13.20%.
“Nvidia options traders have shown a distinct preference for calls lately. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the equity’s 10-day call/put volume ratio of 2.61 ranks in the 97th annual percentile. The high percentile indicates a much healthier-than-usual appetite for long calls over puts of late,” according to Schaeffer’s.
SMH needs to gain another 5.46% to reclaim its 52-week high.
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