Monday’s Vital Data: Applied Materials, Nvidia and Amazon

Stock Market

U.S. stock futures are slipping slightly ahead of a new week of trading. Friday’s rousing rally finally ended the stalemate that had the S&P 500 locked in a tight eight-day range. This morning’s selling pressure has been minimal thus far.

Source: Shutterstock

Ahead of the bell, futures on the Dow Jones Industrial Average are flat and S&P 500 futures are lower by 0.07%. Nasdaq Composite futures have lost 0.05%.

Friday’s ramp sent call volume to the moon. By day’s end, approximately 25.9 million calls and just 18.2 million puts circled the trading tables. The CBOE Volatility Index (VIX) reflected similar options trading with calls heavily favored throughout the day. The single-session equity put/call volume ratio inched higher to 0.49 but remains just above its lowest reading of the year. Meanwhile, the 10-day moving average also dropped to its lowest reading of the year at 0.56.

Options activity was buzzing in Applied Materials (NASDAQ:AMAT), Nvidia (NASDAQ:NVDA) and Amazon (NASDAQ:AMZN), among others.

Let’s take a closer look.

Applied Materials (AMAT)

Source: ThinkorSwim

Source: ThinkorSwim

Applied Materials rocketed 9% on Friday, briefly touching a new record high on the session. The catalyst for the buying binge was better-than-expected numbers during its latest quarterly earnings report.

For its fiscal fourth quarter, the semiconductor company raked in earnings per share of 80 cents on revenue of $3.8 billion. Analysts were only forecasting 76 cents in profits on sales of $3.7 billion.

AMAT stock bears have been routed all year long, but Friday’s pole vault take’s their beating to an new level. The price is trending higher above rising moving averages across time frames. And the volume indicator has seen many accumulation days crop up over the past month reflecting heavy institutional interest. While some profit-taking could be in the offing given Friday’s huge gains, any retracements should be viewed as buying opportunities.

Not surprisingly, options trading saw huge interest in calls. Total activity swelled to 623% of the average daily volume, with 174,325 contracts traded. 72% of the trading came from call options alone.

Nvidia (NVDA)

Source: ThinkorSwim

Source: ThinkorSwim

While AMAT soared on earnings, Nvidia sputtered. NVDA stock fell 2.7% with 26.4 million shares changing hands after reporting adjusted earnings per share of $1.78 on $3 billion in sales. Both metrics topped analyst estimates calling for $1.57 on $2.9 billion in revenue.

Still, the stock slip wasn’t enough to kill the uptrend that carried NVDA to a new 52-week high over the past quarter. With the 20-day, 50-day and 200-day moving averages rising bullishly beneath, this should prove a buying opportunity. The setup I’m eyeing is a breakout over $212. If we can recover from Friday’s dip and finally muster the strength to breach the ceiling, then bullish trades are worth a shot.

As far as the options trading ahead of the weekend goes, activity popped to 399% of the average daily volume, with 420,052 total contracts traded. Calls dominated despite the day’s drubbing, adding 59% to the session’s sum.

The post-earnings implied volatility crush was on full display. The reading fell to 33% which is the lowest level of the year and suggests NVDA stock options are cheap. Couple that with the relatively lofty share price of $204, and bull call spreads become an interesting strategy to game strength in the stock.

Amazon (AMZN)

Source: ThinkorSwim

Source: ThinkorSwim

Do you know who has been utterly absent from the bulls’ bonanza in the technology sector? Amazon. It’s as if the stock has taken ill while everything else is springing to life. While the Nasdaq has been inching higher day after day, AMZN stock has been creeping lower.

It could just be noise, but I don’t blame shareholders if they find the whole thing a bit unnerving. Until we break above resistance at $1,800 or support at $1,700, it’s tough to have conviction on the stock’s next direction.

Options trading saw calls outpace puts while overall activity pushed to almost double the average daily volume. Some 290,458 contracts changed hands and calls drove 60% of the day’s tally.

Implied volatility sits at 18% or the 4th percentile of its one-year range. Premiums are paltry, making it challenging to get behind cash flow strategies like credit spreads. Directional debit spreads are preferred once the stock breaks out of its frustrating range.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here

Articles You May Like

Introducing StockTracker Master Class Volume 1