AMAT is testing key trendlines ahead of the company's earnings report
As the world’s largest chip-equipment maker, the success of Applied Materials Inc (NASDAQ:AMAT) on the charts is tied to how U.S.-China trade tensions thaw out. After the close today, the company steps into the earnings confessional for its second-quarter report, where analysts expect revenue of $7.13 billion and earnings of $2.31 per share, both within the company’s previously issued guidance.
AMAT has a history of negative post-earnings reactions, with declines in three of its last four next-day sessions -- including an 8.2% drawdown in February -- and six of the last eight overall. Over the past eight reports, AMAT averages a 4.6% move, regardless of direction, but for tomorrow's trading the options market is pricing in a 7.9% swing.
Last seen up 0.8% at $175.46, Applied Materials stock is pacing for a fourth-straight gain, extending its year-to-date lead to 7.9%. On Monday, the shares reclaimed their 126-day moving average and are now testing their 200-day trendline, poised to clear the latter on a closing basis for the first time since October.
Options traders are leaning bullish ahead of the event. At the session’s halfway mark, more than 16,000 calls have changed hands, roughly double the average intraday volume. The most popular contract is the June 2027 175-strike call, where new positions are being opened.
Puts have been much more popular than usual, though. AMAT's 10-day put/call volume ratio of 0.95 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 81% of readings from the past year. So while calls still outflank puts on an absolute basis, the high percentile suggests the ratio is on an uptick that nears an annual high rate.