Trader bets on rally in Q4 after September crash
Advanced Micro Devices is set to close in September lower.
The chipmaker fell 10% this month, while the SMH semiconductor ETF was largely flat.
Longtime AMD bull Todd Gordon, founder of TradingAnalysis.com, sees strong demand and solid techniques laying the groundwork for a fourth quarter breakthrough.
âWe look forward to these new, next-generation Zen 3-based processorsâ¦ Everyone in the tech community is looking forward to this,â Gordon told CNBC’s âTrading Nationâ on Tuesday. “Analysts expected sales to slow before these new chips, but customers continue to buy AMD chips even before the relaunch.”
Gordon expects AMD to increase its market share, eating away at Intel’s market share in the chip space. The increased demand for PCs and chips in the home work environment is also expected to contribute to the gains, he said.
âAMD is expected to release its results on October 27. [price-earnings ratio] about 160 which is quite expensive. But, keep that in mind, they are expected to increase their earnings per share by about 72% from last year to this year, and they are expected to grow another 51% next year. The company only trades 45 times its futures earnings with a 50% increase in earnings per share, so I continue to be bullish here, âGordon said.
Instead of seeing the recent weakness as a warning, Gordon sees it as an opportunity – he said the pullback to the mid-1970s coincides with the 50-day moving average and should act as support.
âI own the stock, I would consider adding it to the stock. I own about 3.5% of the AMD position in my portfolio, which is pretty big, but I wouldn’t mind taking it up. ‘at 4-4.5%, “Gordon said.
One way to play AMD, he said, is through an options trade that will get you through more than half of the fourth quarter. He plans to buy the 86 call expiring on November 20 and sell the 100 strike call.
âThat’s a $ 15 spread for which you’ll pay 4.18 cents or $ 418. The maximum potential profit would be $ 1,082,â he said Tuesday afternoon.
AMD was trading at over $ 81 on Wednesday. A move to $ 100, his call for 100 strikes, implies a 22% hike.
Disclosure: Gordon owns AMD.