Applied Materials (AMAT) has beaten the SMH semiconductor ETF by a wide margin. AMAT is up almost 189%, SMH is up 94%, and the XLK tech sector ETF is up only about 41%.
What AMAT Does
AMAT is a picks-and-shovels company. It builds the machines that make computer chips, and chipmakers like Taiwan Semiconductor, Samsung, and Intel use those machines to produce their chips. AMAT is also active in the photonics sector, which covers fiber optics and other tools and products used by AI and supercomputer clusters.
The Chart
A gradual upward-sloping trend line (drawn in white) runs across the lows. One clear downside break dropped price to 442, a level that matches old highs and later lows, so 442 stands out as an important downside level to watch.
In the shorter term, a high near 630 started a downward channel marked by two blue lines. Price has since broken out to the upside, but the move has been weak - more of a slow grind than a strong push. There is a short-term range between about 508 and 555 (two green lines). Another relative high near 577 marks possible resistance.
Moving averages: the three shorter-term averages sit clustered near 533. The 63-day average is a bit lower, near 519. The 5-day and 21-day (dark blue and teal) sit almost on top of each other. This cluster is a confluence area. With a bullish view, it can act as support and a buying spot. With a bearish view, it becomes an inflection point where a breakdown might start.
RSI had been falling, but it has turned back up above the 50 midline heading into earnings.
Volume profile shows a node between about 525 and 560, and another between 580 and 595. Activity is thinner to the downside, with a further node around 420 to 450.
Expected Move and the Trade
Earnings are due after the close today. Looking at the expected move: the September window (green box) is plus or minus 17.7%. Its downside roughly lines up with the low area noted earlier (old highs and later lows), and its upside reaches another notable high. That frames the broader range for the next trading month or so.
For this specific trade, the focus is the weekly expiration expiring tomorrow (orange box), with an expected move of plus or minus 7%.
The example is a short-term earnings trade: an August 14th 520/515 put vertical taken for a 1.25 credit - an aggressive short put spread. Max profit is 1.25 (the credit received for putting on the trade). Max loss is 3.75, giving a one-to-three reward-to-risk ratio. Traders often prefer one-to-four for this kind of setup, so this one carries a slightly higher risk profile.
The profit zone sits almost entirely inside the shaded expected-move area. With the expected move near plus or minus 7%, the break even at 518.75 is about 5.3% to the downside - inside the expected range but near its lower end. That makes it a higher-probability trade, though never a sure thing. The goal is simple: price stays above the 518.75 break even.
