The Level to Watch for Analog Devices Stock Ahead of Earnings

Analog Devices stock has traded in a tight range for months

Aug 29, 2017 at 1:57 PM
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Circuit specialist Analog Devices, Inc. (NASDAQ:ADI) is scheduled to report earnings tomorrow morning, and the stock has been strong following such quarterly events. Specifically, the shares have ended higher in the session after earnings in seven of the last eight quarters, averaging a one-day swing 2.6%. However, the one negative outlier occurred after last August's release. This time around, the options market is pricing in a swing of 4.9% for ADI stock in tomorrow's session.

Looking closer at recent options data, the September 75 put saw the largest increase in open interest during the past 10 days, and it wasn't even close. The strike is now home to peak open interest of all Analog Devices contracts. Data isn't entirely clear how traders positioned themselves here, but it's possible much of the action was of the sell-to-open variety, meaning speculators expect the $75 level to act as a short-term floor for ADI shares. 

More broadly speaking, call buying has been popular on the stock. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 50-day call/put volume ratio of 3.98. Not only does this show four calls have been bought to open for every put, but the reading is just 3 percentage points from a 52-week high. Said differently, options traders have been unusually bullish. 

Analog Devices stock sports a year-over-year lead of more than 26%, and touched a roughly 17-year high in May. But since then, the shares have been mostly trading sideways, hanging right near a 23.6% Fibonacci retracement of their 52-week low and high. It's also notable that a 50% Fibonacci retracement of these levels sits right below the aforementioned $75. However, ADI has historically struggled in September, giving back 1.3% on average -- though that's the norm for the broader stock market

analog devices stock


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