More Upside Left in TXN?

02/17/2009 10:59 am EST


Nick Perry

Equity Options Trader, Schaeffer's Investment Research

Semiconductor giant Texas Instruments (TXN) received a boost when UBS lifted its rating on the security from "neutral" to "buy." The brokerage firm also hiked its price target to $20. Overall, analysts remain skeptical of the shares. The stock has earned eight "buy" ratings, 14 "holds," and four "sells," leaving ample room for additional upgrades.

What's more, the chip company could benefit from price target increases. Thomson Reuters reports that the average 12-month price target for TXN stands at $15.26—more than 10% below the stock's current price. Any price target upgrades could also attract fresh buying pressure to the shares.

Meanwhile, Wall Street isn't the only group that is skeptical of the security. Options players have loaded up on bearish bets, pushing the stock's Schaeffer's put/call open interest ratio to an annual high of 1.21. This lofty reading indicates that investors have not been more pessimistically aligned toward the shares at any other time during the past year.

From a technical perspective, the stock gained nearly 4% Friday afternoon, bouncing off support at its ascending ten-day moving average. The equity is still facing some short-term resistance in the 17.50 area, yet in the plus column, TXN is poised to close its second consecutive week above both its ten- and 20-week moving averages—a feat not accomplished since early June. Traders should keep a close watch on this stock. If it can continue its current short-term rally, it could shake loose some of the bears, creating a fresh wave of buying pressure.

By Nick Perry of Schaeffer’s Trading Floor Blog

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