Options Corner: STX Parabolic Rally & Parabolic Pullback into Earnings

We're back on morning mover Seagate quarterly results will give us insight into the chip trade as the company gets set to report earnings later. Revenue is expected to come in at 4.11 billion. Earnie expected to check in at 7.44 share on an adjustedasis. Now, shares of the chip manufacturer have seen some weakness alongside the broader tech trade, but still are up more than 124% year to date. Time now for options corner. Joining us take a deeper look at the chart. First is Tom Weiss senior options contributor. All right Tom let's end cohost of Fast Market. Of course. What trends shouldwee chart. First up. Well we've seen that parabolic move and art elevator up and elevator down. As far as the memory chip space. I've got a chart here that kind of shows you aparison of what's going on in thisnt. Remember you know Western Digital Seagate a little bit different from micron and SanDis far as the products that they provide. But you can see here SanDisk is definitely Outperformer here. And then you've micron which has been pulling back but not as much You've got Seagatehich is doing a little bit better than its main cpetitor. And that's Western Digital. Now remember Western Digital reported earning last week that were pretty good. Beat Re's quarter revenueter than expected.ected guidance better than expected. But the sto still fell. So this is one of those sectors and segments withi technology that's been under pressure. A lot of concerns about AInd and fundinging forward. And then you start looking at ce where these big customers are putting their money. As far as the AI infrastructure build out is concerned here. Now I've got another chart here, one one day that's kind of reflective of that elevator up and elevator down typ of scenario. You mentioned fact that the stock is still up prettyignificantly in 2026,but % e saw in June. On this one year, one day chart, there's the elevator up all the way to those all time highs, $1,145 Seagate hit. And that was in . Ae pullback with the overall market chop back andorth. But now we've got another leg down here for Seagate Tecies broken thrhe 50 day simple moving average a couple of weeks ago. Now we're below the 200 day moving average, which we haven't been below over a year and a half at this point. So that's a concern, I think, for investors going into this report. You look at the momentum here. We've got RSI down around the 34 level. So almost oversold eve a little bump that we're seeing in the shares about 34 le Anything below 30 is considered oversold. So we're just above above those levels. We'll see if we can get some momentk to the upside. As far as the RSI. Now we'll start lo at some levels maybe that investors should be focused on. Well you should be taking into account that below that 685 level stock. Looks like iing to open up about 655 here this morning. So that 685 200 day simple moving average that might be a headwind to the upside, a small one. But then you start loo at the volume profiles up here , you know, the 690 level might be a level that you need to look at thisevel right here, here, which is just about the 200 day simple moving average. And then you start looking at support. Where's my support going to be. Maybe near about five. Ten is theirst node as far as heavy volumes but really clouded above where the stock is. We definitely need a good report ge levels to the upside here for Seagate. What's the approach you would take for an example trade Tom. Well don't be a hero type of strategy. I mentioned the Western digital earnings last week where the stock fell after a pretty goodeport. Maybe Seagate susceptible to that too. So I want to give myself maybe a buffer to the downside before start getting hurt. In case stock does go lower. You mentioned t fact that they're expecting about $4.11 billion in revenue. So I looked at something passive that's still directional, right? It's n to bullishelling it out of the money. Put vertical. I use October 30th weekl option. So just three days to expiration. This is an earnings type example trade here. If you're if you're bullish on this name earnings we're going to sell ou. That's about $35 b where the stock's going to open up abo make a risk to find this is gs right. A lot of event risk by the 600 strike p So a short $20 wide neutral to bullish put vertical. You're going to co roughly about a $6 credit. If we open up here about 655. That's what you can make $600 per spread with $1,400 in ri But that's all the way below the 600 level. Takes your break even 614 to the downside. That's over 6% below the current share price in Seagate Techns. Probability of finishing out of the money on that short 620 put. That's about 63%. So you've got better probability of success r more than you can , but you've got that nice buffer downside before you start getting hurt.