The S&P index hit a session high of 12.43 points but has now fallen, trading down by 4.07 points. It also reached a session low of -6.29 points. In contrast, the NASDAQ index is up by 51.87 points, or 0.25%, with fluctuations between 13.80 and 93.86 points. The Dow industrial average reached a high of 45.06 points and a low of -108.15 points. It hovers near the low at -97 points, a decrease of -0.22%. Both Nvidia and AMD stocks have posted gains, with Nvidia up 1.14% and Broadcom down by 0.94%. SMCI, which produces Nvidia chips, climbed by 7.64%.

US/EU Trade Deal Impact

The US/EU trade deal benefits American chipmakers, raising AMD’s target price from $150 to $210 by UBS. AMD’s stock has bounced back by 128% since a prior downturn of 65%, yet it is still below the 2024 high of $227. Today, AMD reached a high of $174.70 but did not surpass the October peak of $174.05. The hourly chart indicates AMD’s price has been trending upward since April, staying above the 100-hour and 200-hour moving averages, which signals strong momentum. The current target of $174 suggests overbought conditions and could lead to consolidation unless the price dips below the 100-hour MA. The broader market appears cautious, while the tech-heavy index moves forward, driven by a few large-cap stocks. The CBOE Volatility Index, or VIX, is near a historical low of 13, indicating that traders are not anticipating significant risks in the overall market. This low volatility makes buying protective puts on major indexes like the S&P 500 more affordable as a hedge for portfolios. The semiconductor sector remains the main driver, and derivative strategies should focus here. The PHLX Semiconductor Index (SOX) has risen over 30% this year, confirming the leadership mentioned. A recent 10-for-1 stock split by the sector’s largest company, effective June 10th, will increase liquidity and may draw more retail option traders into the chip market.

Technical Analysis and Strategies

For the highlighted chipmaker, the technical outlook recommends a careful but optimistic approach as it faces a key resistance level. The stock is in a strong uptrend above its important moving averages. Using bull call spreads could be effective, which involves buying a call option and selling another at a higher strike price to lower initial costs while betting on a price increase. For those anticipating near-term consolidation due to overbought conditions, selling options could be another strategy. Selling cash-secured puts at a strike price below the rising 100-hour moving average could work well. This allows traders to collect premiums while waiting for a potential price drop to a stronger support level. Historically, when a stock consolidates closely below a significant resistance level, it often precedes a significant price movement. Traders should monitor the stock’s implied volatility for any notable changes. A rise in volatility might indicate that a breakout or breakdown is coming, creating opportunities for strategies like straddles, which profit from large price swings in either direction. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now