Trading Alert for Atmel Corporation (ATML)

by Chris Johnson and Jon Lewis | October 28, 2010 11:48 am

The pace of earnings reports slows a bit next week. But it’s still a busy week, with nearly 1,000 companies reporting, with around 80 of those coming from the S&P 500. One name that’s flashing a bullish sign is Atmel Corporation (NASDAQ: ATML[1]), a provider of semiconductor integrated circuits.

ATML reports after the close on Thursday, Nov 4. While its earnings record is spotty, we’re seeing a couple of things investors should like. First, ATML stock has made big up moves after the past two earnings reports of 18.7% and 7.4% in just one day. And that includes a huge earnings miss last quarter.

The second thing is that ATML’s competitors have done well in the earnings confessional this season. Cypress Semiconductor Corporation (NASDAQ: CY[2]) beat by a penny last week and is up about 5% since then. And LSI Corporation (NYSE: LSI[3]) beat after the close on Wednesday, which had the stock trading higher after hours.

ATML has been on a huge run since July, gaining around 70%. The past week has seen ATML shares rally to sit just below an eight-year high. Overhead technical resistance is therefore non-existent, and call open interest is light. That gives ATML shares plenty of room to run.

ATML chart

Sentiment toward ATML is largely positive, which is to be expected given the stock’s huge rally. So we’re not seeing a problem there.

With the earnings success of its competitors and the history of sharp moves following recent reports, we’re looking for ATML to pop next week. For a safer play, buy the November 7.50 call, which is about a dollar in the money. Those who want to go for the big score should opt with the November 9 call for around 30 cents.

  1. ATML:
  2. CY:
  3. LSI:

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