It's been an interesting few months for Applied Materials, Inc. (NASDAQ:AMAT). The shares moved lower in mid-August after the company's outlook spooked investors, only to make up those losses and then some in the subsequent weeks, including their 12% gain in October so far, sparked in part by strong quarterly numbers from rival Lam Research (LRCX) last week. AMAT stock hit a 52-week high of $57.29 yesterday, and was last seen at $55.99.
Historical data from Schaeffer's Senior Quantitative Analyst Rocky White shows that the equity's rally could extend into the weeks ahead. Applied Material appeared in a study of names trading near new highs but which also sport low volatility expectations, based on our Schaeffer's Volatility Index (SVI). This reading for AMAT comes in at 31.6%, ranking in the 14th annual percentile. The last six times the stock was near a new high and had this low of an SVI at the same time, the shares were higher one month later five times, and averaged a gain of 6.5%.
Options traders have been buying calls in recent weeks, so many should be well-positioned to profit from a rally. The 10-day call/put volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.84, and ranks in the 73rd annual percentile. This shows stronger-than-usual demand for long calls lately.
During this time, there was a notable increase in open interest at the December 57.50 call, and data from the major exchanges confirms mostly buy-to-open activity here. These bulls are betting on Applied Materials stock breaking out above $57.50 in less than two months. But even with this increase in call buying, call open interest sits in just the third annual percentile, and peak open interest on the semiconductor equipment specialist stands at the January 2020 42-strike put.