Activity slows down on the earnings front next week, but there will still be plenty of action for option trading investors. More than 40 S&P 500 companies are on the schedule, although the “sizzle factor” is largely missing other than perhaps Dell (NASDAQ: DELL). Real estate (including hotel chains), food companies, energy, and gold miners dominate the docket.

Let’s go outside these sectors and give a closer look at tech name Analog Devices (NYSE: ADI). The chipmaker reports on Tuesday after the close, with analysts expecting a robust 51% increase in per-share profit from a year ago. That gain doesn’t sound as daunting, though, when compared to the average 150% increase logged over the past four quarters. What’s more, ADI hasn’t missed an estimate in nine straight quarters.

The shares have done well after recent reports, gaining more than 3% on average in the week following each report. And ADI’s competitors that have reported this quarter  — STMicroelectronics (NYSE: STM) and Texas Instruments (NYSE: TXN) — may not have surged after earnings but have nonetheless continued their strong up trends.

Speaking of up trends, ADI is on one of its own. The shares are up more than 40% during the past five months and are currently flirting with highs last seen in 2007. The 10-day and 20-day moving averages have been working in tandem to support this rally. One concern is the 40 level, which has proven stubborn for the past week, as well as several times dating back to mid-2004.

Analog Devices

Sentiment is mixed toward ADI, with option traders most optimistic and analysts the most skeptical. Short interest is in the middle, although likely not high enough to cause a short squeeze. All in all, sentiment doesn’t help or hurt this trade.

With expectations far from excessive, sentiment mixed, a strong history of earnings success, and the post-earnings strength of other chip stocks, we expect ADI to overcome the 40 level and power to a multi-year high after reporting next week.  Consider the ADI March 40 Call for around $1.25.

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