Today was another amateur day. We purchased the June $32.50 call on Advanced Micro Devices Inc. (AMD) at $3. Last Friday Dell announced that they are planning to replace some of their higher-end servers with AMD chips, in place of Intel’s. Their stock shot up with 3 green arrows with 4X average volume. These 4 technicals were great, but what should have kept us out of this play were the facts:
- Slight down-trend of the 30-day moving average. (Today it has flattened out.)
- Down-trending industry group.
- Bearish sentiment on the markets as a whole.
We are not going to exit this play yet. Since the price is above average, the trend is turning, and may bounce off the 30-day m.a.
We were torn between paper-trading and purchasing the options, so we invested a smaller percentage into this speculative play.
