Why We Bet on This Chip Stock's Next Move Lower

Group 1 - The stock of Applied Materials Inc (NASDAQ:AMAT) has struggled to gain traction after its February 14 earnings report, breaking below a trendline that connected higher lows since late December [2] - Following the earnings report, shares attempted a rally but were rejected at the 50- and 80-day moving averages, with the 80-day trendline being significant as it acted as support in April 2024 and capped rallies in subsequent months [2] - The stock is currently more than 30% below its all-time high in July and has slipped beneath prior support levels at $175, indicating elevated downside risk and making it an opportune time to buy put options [3] Group 2 - Wall Street analysts maintain an overly optimistic outlook on AMAT, with 26 "buy" ratings, eight "hold" recommendations, and only one "sell," suggesting potential for downgrades [4] - Options traders exhibit signs of over-exuberance, with a 10-day call/put volume ratio of 2.10, placing it in the 92nd percentile of its annual range, which has historically preceded weak price action [5] - The recommended put options have a leverage ratio of 8.0 and are expected to double with an 11.3% drop in the underlying equity [6]