After hitting new highs @110.88 on January 19, AMAT came into my radar. My usual response to new highs is to wait for a pullback and some consolidation before jumping on it. This time was no different.
On 1/30 saw a huge drop due to GME and AMC (aka reddit short squeeze). Market pulled back almost 2% and got everyone scared. However as a technical trader, there was plenty of opportunity to see that things were improving. The first week of Feb, AMAT bounced alive having dropped below 100 and touching support levels of 97 before buyers came to the rescue. After seeing strength, I opened an initial position with a Feb 19 Call at 100 strike price. This provided exposure at the money and 16 days before earnings release.
The next day I see another pop in open and dropping back down to support level of 100. I doubled down on the position seeing the strong open and afternoon fade. Two days later on 2/5, AMAT popped to 105 and faded in the afternoon to a low of 101 representing a higher low. I proceeded to add a third time at the same 100 strike price. This was 13 days before earnings.
My intuition proved correct as AMAT popped unto 107.5 level (higher high) and faded into the afternoon with a higher low on 2/10 (8 days before earnings). Seeing resistance level at around $111 level, AMAT has plenty of room to fill the gap as well as plenty of time to achieve this so I decided to add to my position a higher strike price, Feb 19 calls at 105 and 106.
On 2/11 AMAT jumped 6% reaching new high levels. I stuck to my plan to take 1/3 off the table as my original calls reached over 200% gains. I kept the remaining 2/3 for selling next week knowing that as companies approach earnings, volatility increases, and as a result, premiums increase in value.
So on Friday 2/12 heading into a 3 day weekend, 6 days before earnings, I have about 2/3 of my position with options up between 250-350%. Not bad for two weeks of trading.
God bless and happy trading!
