Looking back, we examined the BCI Premium Stock Report on the Sunday May 23, 2021, after expiration Friday, for our Monday trade selections. One of the securities we choose to analyze is Applied Materials, Inc. (AMAT), explains Alan Ellman of The Blue Collar Investor.

On Monday morning, May 24th, AMAT gaps up well above the price movement of the S&P 500. Is AMAT now too expensive? Should we still consider this stock or look for an alternative? This article will investigate the factors that caused the price gap-up and make some common sense conclusions regarding the next steps.

What Caused the Gap-Up?

On Friday, 5/21/2021, AMAT announced a stellar earnings report resulting in the gap-up as the May contracts expired. There was a 5.2% earnings surprise and a 3.2% revenue surprise.

AMAT: Positive Earnings and Revenue Surprises
AMAT: Positive Earnings and Revenue Surprises

There’s More

On 5/24/2021, IBD named AMAT its "stock of the day," further enhancing the gap-up in price:

Price Chart of AMAT Pre- and Post-Earnings

AMAT Price Chart May – June 2021
AMAT Price Chart May – June 2021

After the two gap-ups, AMAT moved to a consolidating chart pattern, out-performing the price movement of the S&P 500. We now know that the gap-up was based on outstanding corporate fundamentals. We ask ourselves if we would buy AMAT today at the current price. For me, good news is a positive and would encourage me to consider this stock. I may wait a day or so for the price to settle, but the overall picture for AMAT was only enhanced.


Good news should not discourage us from incorporating a stock into our option-selling portfolios. Researching the cause of one or more gap-ups does make sense. If the gap-up is based on sound fundamental data, all systems are “go.” Stock prices go up and down and this is the risk we are willing to take in return for beating the market on a consistent basis. More often than not, there will be a reversion to quality, the type of securities identified in our BCI reports.

Learn more about Alan Ellman on the Blue Collar Investor Website.