Credo Technology Plummets 5.7% Amid Semiconductor Sector Turbulence: What's Fueling the Selloff?

Summary
• CRDO drops 5.7% to $132.22, hitting intraday low of $129.51
• Turnover surges to 4.28 million shares, with 2.67% turnover rate
• Sector-wide regulatory and geopolitical pressures dominate headlines

Credo Technology’s sharp intraday decline has drawn attention amid a broader semiconductor sector selloff. With the stock trading below its 52-week low of $29.09 and facing heightened volatility, investors are scrambling to decipher the catalysts behind the move. The sector’s exposure to U.S.-China trade tensions and regulatory crackdowns—evidenced by Trump’s recent chip deal block and Beijing’s retaliatory tariff threats—has amplified uncertainty. CRDO’s technical indicators and options chain suggest a bearish near-term outlook, with key levels and contracts offering strategic entry points for traders.

Regulatory Scrutiny and Sector-Wide Pressures Drive CRDO's Sharp Decline
CRDO’s 5.7% drop reflects a confluence of sector-specific and macroeconomic factors. The U.S. government’s recent block of a Chinese-linked chip deal, coupled with delayed China chip tariffs until 2027, has heightened regulatory uncertainty. Additionally, sector news highlights escalating supply-chain tensions, including legal battles between Nexperia and Wingtech, and U.S. export license delays for AI chips. These developments have spooked investors, triggering a flight to safety and amplifying volatility in high-growth tech stocks like CRDO.

Semiconductor Sector Under Pressure as Global Tensions Escalate
The semiconductor sector is broadly underperforming, with Advanced Micro Devices (AMD) down 3.56% intraday. CRDO’s decline aligns with sector-wide concerns over U.S.-China trade dynamics, regulatory hurdles, and supply-chain bottlenecks. While CRDO’s price action mirrors the sector’s bearish momentum, its technical indicators suggest a more pronounced near-term correction compared to peers like AMD, which remains closer to its 52-week high of $213.80.

Bearish Technicals and High-Volatility Options Signal Strategic Entry Points
• MACD: -4.26 (below signal line -3.59), RSI: 45.51 (oversold), Bollinger Bands: $125.33 (lower band), $174.33 (upper band)
• 200-day MA: $109.67 (well below current price), 30-day MA: $154.70 (resistance ahead)

CRDO’s technicals paint a bearish picture, with price trading near the lower Bollinger Band and RSI hovering in oversold territory. The 200-day MA at $109.67 suggests further downside potential if support levels break. For options traders, two contracts stand out:

• CRDO20260116P130 (Put):
- Strike: $130, Expiry: 2026-01-16
- IV: 81.40% (high volatility), Delta: -0.413 (moderate sensitivity), Theta: -0.1008 (moderate time decay), Gamma: 0.0208 (high sensitivity to price swings), Turnover: 275,670 (liquid)
- Leverage Ratio: 21.73% (amplifies returns), Price Change Ratio: 68.57% (strong momentum)
- This put option offers a high leverage ratio and gamma, ideal for capitalizing on a 5% downside scenario. A 5% drop to $125.61 would yield a payoff of $4.39 per contract, translating to a 33% return on the strike price.

• CRDO20260116C130 (Call):
- Strike: $130, Expiry: 2026-01-16
- IV: 78.69% (high volatility), Delta: 0.588 (moderate sensitivity), Theta: -0.583 (aggressive time decay), Gamma: 0.0215 (high sensitivity), Turnover: 558,332 (extremely liquid)
- Leverage Ratio: 15.42% (moderate amplification), Price Change Ratio: -20.68% (bearish bias)
- This call option’s high liquidity and moderate delta make it a hedge against a potential rebound above $130. However, its negative price change ratio suggests caution.

Trading Insight: Aggressive bears should prioritize CRDO20260116P130 for a 5% downside bet, while cautious bulls may use CRDO20260116C130 as a liquidity-anchored hedge. Watch for a breakdown below $125.33 to confirm the bearish thesis.

Backtest Credo Technology Stock Performance
The iShares Core MSCI All World ex USA ETF (CRDO) has demonstrated resilience following a -6% intraday plunge from 2022 to the present. The backtest reveals a 3-day win rate of 51.85%, a 10-day win rate of 54.25%, and a 30-day win rate of 61.22%, indicating a higher probability of positive returns in the short term. The maximum return during the backtest was 23.71%, which occurred on day 59, suggesting that CRDO has the potential for significant recovery after a sharp decline.

CRDO Faces Critical Juncture: Watch for Breakdown Below $125.33 as Sector Volatility Persists
CRDO’s sharp decline is a microcosm of the semiconductor sector’s broader struggles with regulatory uncertainty and geopolitical tensions. While technicals and options data suggest a bearish near-term outlook, the stock’s proximity to the 52-week low and high implied volatility in the options chain indicate potential for further volatility. Investors should monitor AMD’s -3.56% move as a sector barometer and watch for a breakdown below the $125.33 lower Bollinger Band. Action: Short-side traders should target a breakdown below $125.33, with CRDO20260116P130 offering a high-leverage entry. Long-term holders may wait for a rebound above $140.24 (previous close) to re-enter.