Altera puts pop at long-term resistance

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Altera has returned to a key price level from more than a decade ago, and investors are nervous that it may roll over after a major rally.

ALTR optionMONSTER's Depth Charge tracking system detected the purchase of more than 4,000 March 42 puts for $1.70 against open interest of just 694 contracts. There was also buying in the March 44 puts for $3.40 and the March 41s for $1.40. Puts outnumbered calls in the semiconductor maker by a 7-to-1 ratio, which reflects the cautious sentiment.

ALTR is down 0.81 percent to $41.47 in midday trading but still up 60 percent in the last six months. Its last earnings report on Jan. 25 beat estimates, and management forecast increased market share as its programmable chips gain customers.

The stock has now returned to a price where it gapped lower as the tech bubble was collapsing in October 2000 (red line and arrow on chart). ALTR double-topped at the same level later that same month, before proceeding to collapse along with the rest of the sector in the next two years.

Chart watchers often look for resistance to form at such long-term levels. If it happens this time as well and ALTR drops, then the puts bought today would protect investors from a pullback without forcing them to sell shares.

(Chart courtesy of tradeMONSTER)



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: ALTR

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