If you are looking for the drop to signal a buying opportunity, you are likely going to find the end of the day Wednesday or Thursday better than Tuesday. There is no hurry buying the dip with AMD. Stocks dumped as a result of profit warnings usually take a full two good earnings quarters to recover. Take your time and do your homework before allocating capital here. Look for the second break above $6 as the one that "sticks." Want to see a classic miss earnings result a few weeks after the fact? Take a look at Dell or HP. Dell disappointed and traded from $15 down to the current $12.40. Also, take close note of the next few days after earnings. This is a classic pattern I see often, and you can, too. Simply use your software to look at charts from the past few quarters and review the ones that gapped down the next day. The high placed a couple of days after the gap down in Dell is now resistance.
Last quarter Apple's revenue was just short of $40 billion, an increase of 59% over the same period last year. The biggest product is the iPhone but Apple is firing on all cylinders. Apple also had record computer sales in the quarter, selling four million Macs. This represents an increase of 7% over the same quarter last year. If a worldwide 2 percent computer growth is expected and Apple is growing 7 percent, you can see a problem for AMD rather quickly. Apple's growth feeds directly into Intel. What's the best play with AMD? There should be a very attractive trade coming up Wednesday and or Thursday. Near the end of the day, if still trading lower, sell out of the money puts. Fear of continued losses tends to push portfolio insurance prices up dramatically, while at the same time the stock should bottom. It's not one to get greedy with, hold on for a few days and as the implied volatility falls (hopefully with a nice dead cat bounce) exit out with a quick hit and run for profits. Otherwise for longer term investors, the best play is to wait until we are closer to the next earnings release for an entry. At the time of publication the author did not hold a position in any stock mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.