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Applied Materials Lures Bears with Latest Pullback

Put buyers eye AMAT after the stock's rejection from a key trendline

by 7/6/2012 1:51 PM
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Put volume has ramped up today on Applied Materials, Inc. (NASDAQ:AMAT - 10.99), with roughly 7,150 contracts crossing the tape so far -- representing four times the stock's expected intraday action. Traders are dividing their attention between the July 11 put, where 3,439 contracts have been exchanged, and the August 10 put, which has seen volume of 2,761 contracts. Most of these puts have traded closer to the ask price, indicating they were purchased.

This preference for puts appears to be part of a growing trend for AMAT. During the past 10 sessions, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.99 puts for every call on AMAT. This ratio arrives in the 99th percentile of its annual range, as traders have purchased puts over calls at a faster pace only 1% of the time during the past year.

Over the past 52 weeks, AMAT has lost 15.7% of its value, so put buyers could be expecting this longer-term swoon to continue throughout the summer months. Most recently, the stock has been rejected by resistance in the $11.50 neighborhood -- a former layer of support that is currently home to AMAT's descending 80-day moving average.

Daily Chart of AMAT since February 2012 With 80-Day Moving Average


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