Chip Stocks and News from that Industry Today 

Tom Gentile

Posted in
Daily Report

By: Tom Gentile
August 9th, 2022

2 mins read

Plenty of news today with the Chip stocks. And by chip stocks we are not talking about snack chips or poker chips. We are talking about semiconductors, stocks like NVIDIA Corporation (NASDAQ: NVDA) and Micron Technology, Inc. (NYSE: MU).

NVDA beat on their recent eps number but forecast lower revenue in the next quarter. This caused the stock and other stocks in the sector to drop. And the drop continued today with MU forecasting a lower revenue number as well.

Forecast in Earnings and Revenue Are What Investors are Focusing On

Though both companies reported an earnings per share (eps) number that beat expectations investors seem to be more focused on what the companies are saying about their future earnings and revenue.

When companies report their earnings it’s nice to see them meet or beat expectations. As long as there is no earnings surprise there shouldn’t be any knee-jerk reactions, especially of the sell the stock variety.

Investors and money managers are likely to have a PE ratio in mind for stocks they own for their firms and the firm’s clients. When a company/stock announces a revision to their expected eps and or revenues the firms make the decision as to the amount of the holdings they have of those stocks.

Figure 1: Unusually High Call Option Volume List
Figure 1: Unusually High Call Option Volume List

Chip Stocks with Unusually High Call Option Volume

#4 on the list is NVDA and #8 is Advanced Micro Devices, Inc. (NYSE: AMD).

Both of these are semiconductor stocks and give indication there is interest in these, either because of earnings or in spite of earnings.

If one doesn’t want to try and pick one chip stock to trade options on they can consider the ETF that tracks a basket of them like the VanEck Semiconductor ETF (SMH).

Figure 2: 120-day Candle Chart on SMH
Figure 2: 120-day Candle Chart on SMH

The ETF is up off its June lows, but with the recent earnings and revenue guidance you can see it pulling back. If you want to take the approach you will buy the dip, well, the dip is happening. How far down will it go? Can’t say, but I have taught Fibonacci recently so maybe slap that on the recent up leg to see a Fib retracement zone.

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