Fabrinet (FN) reports earnings after the close today. Analysts expect near $1.3 billion in revenue and $3.85 a share in adjusted earnings. This electronic manufacturing company has gained from the AI boom, with shares up more than 75% year over year, though it has also pulled back a lot from recent highs.
Where Fabrinet Fits
Fabrinet (FN) works in high-tech optical technology, photonics and products used heavily in AI infrastructure. It is beating the tech sector overall, up 74% on the year even after a large drop. Other photonic names have become more prominent in recent months, some with explosive gains: Lumentum (LITE), Ciena (CIEN), Coherent (COHR), Applied Materials (AMAT), and Corning (GLW). Fabrinet is a more secondary part of this group but still worth watching. It is not a household name, but maybe it should be.
The Chart
There was a repeated ceiling near 730. The stock topped out near 748.89, but only one close made it above that level, then it quickly fell into choppy trading that turned into a downward move. It stabilized around 424, the low point after a gap up that got tested repeatedly and became the low before an upward channel formed. A notable gap to the upside, 460 to 505, set up that channel - two parallel lines both pointing up steeply. Friday's price action pushed beyond that channel, which is common heading into earnings.
The high near 590 is a mark to beat to the upside. Another relative high near 650 stands out as possible resistance.
Moving averages show recent improvement. The 5-day EMA (dark blue) has crossed above all three slower ones. The 5-day and 63-day EMA (gold) sit close together, at 556.70, 540, and 339 respectively. Breaking below those levels could be an early warning of a trend change if earnings disappoint.
RSI is trending up but stays below the 70 overbought line. Bulls want a break above 70; bears want a break below 50 to signal a shift to bearish momentum.
The volume profile shows the heaviest trading between about 435 and 560. The point of control - the single heaviest trading area, marked by the thick red line - came in at 445. Price now sits in a lighter area. Moving up, the next pocket of heavy trading runs from 620 to 707.
The Trade
Fabrinet (FN) has no weekly options, and the premiums are very high right now. The earnings expected move for August 21st (orange box) is plus or minus 12.2%. The example trade looks further out, to October 16th (green box), a plus or minus 26% move whose upper edge lines up with the prior highs.
The trade targets a breakout above the highs near 600: buy the October 16th 600/660/720 call butterfly at a 385 net debit. This is a bullish outlook with 60 days to expiration.
- Max loss: 385, the debit paid.
- Max profit: 5,615, reached if the stock expires right at the 660 middle strike.
- Break evens: 603.85 (about 4.5% up) and 716.15 (about 24% up).
The point of this trade is to get upside exposure at a relatively low cost, since premiums are so high. That makes it more accessible for a retail trader. If the stock overshoots the target to the upside, the trade can turn back into a loser at the same 385 max loss. The position does not have to be held to expiration; it can be closed early if things go well.
Earnings will be a critical catalyst for whether the trend regains strength and the recent highs get recaptured.
