Surviving AMD in an Intel World

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.

HP and Dell sell Intel(INTC) and AMD products. Apple, on the other hand, moved to Intel chips a few years ago and the impact on Intel's stock says it all. Normally one would expect a falling tide to lower all boats, but in the case of AMD and Intel, the tide isn't the biggest influence.

As long as Intel is able to move into other product lines while consumed by every computer maker, it is expected to have the edge in stability of sales.

Apple continues to execute flawlessly while others try to maintain their balance. At the time of writing, shares in Apple and Intel are higher. (Read my recent article about Apple in the second half of 2012 Apple, Builders to Have Opposite Impacts in Second Half.)

We have our answer to why AMD's report doesn't compute. Apple's iPad and tablets are eating AMD's lunch. After Apple produced one of the greatest earnings beat in the history of tech, it doesn't take a leap of understanding to figure out someone was going to end up short. Intel doesn't have all of Apple's products, but any share of Apple is better than none.

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.