DailyPlay – Opening Trade (AMAT) – May 21, 2025

AMAT Bullish Opening Trade Signal

Investment Rationale

Applied Materials (AMAT) offers a compelling bullish setup driven by structural demand tailwinds in the semiconductor equipment space and strong capital return policies. The company’s March announcement of a $10 billion share repurchase authorization and a 15% dividend increase underscores management’s confidence in long-term cash flow visibility and balance sheet strength. Although shares sold off sharply following the Q2 2025 earnings report, despite an EPS beat of $2.39 vs. $2.31 expected, this reaction appears driven by short-term concerns over China-related headwinds rather than a deterioration in core fundamentals. The post-earnings weakness presents an opportunity to enter a high-quality name at a relative discount.

Shares of AMAT have recently broken out above the 50-day and 20-day moving averages, signaling renewed buying interest after a multi-month downtrend. The stock is currently consolidating just under the 200-day moving average (~$174), which now serves as the next key resistance level. Price action has built a higher low formation since the April bottom, suggesting improving trend structure. A close above $174 would mark a bullish continuation signal, while the $159.75 area represents nearby support from short-term moving averages and the April breakout zone.

Despite slower-than-average top-line growth, AMAT remains fundamentally attractive due to strong profitability and relative valuation support:

• Forward PE Ratio: 17.80x vs. Industry Median 24.65x
• Expected EPS Growth: 8.43% vs. Industry Median 16.51%
• Expected Revenue Growth: 6.26% vs. Industry Median 10.46%
• Net Margins: 24.06% vs. Industry Median 10.43%

Set up a neutral-to-bullish trade on AMAT with a June 27, 2025 expiration, using a bull call spread alongside selling a $165 put and buying a $155 put. With 37 days remaining, this trade profits if AMAT remains above $165, leveraging a 0.58 risk-reward ratio. It’s an effective way to benefit from a stable price or a rebound to the 200-day moving average after an earnings-related drop.

AMAT – Daily

Trade Details

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish Credit Spread

Details: Sell to Open 3 AMAT June 27 $165/$155 Put Vertical Spreads @ $3.70 Credit per Contract.

Total Risk: This trade has a max risk of $1,890 (3 Contract x $630) based on a hypothetical $100k portfolio risking 2%. We suggest risking only 2% of the value of your portfolio and divide it by $630 to select the # contracts for your portfolio.

Trend Continuation Signal: This is a bullish trade on a stock that is expected to continue higher over the duration of this trade.

1M/6M Trends: Bullish/Mildly Bullish

Relative Strength: 7/10

OptionsPlay Score: 91

Stop Loss: @ $7.40 (100% loss to value of premium)

View AMAT Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Tuesday ‘s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View AMAT Trade