Price Forecast:

Bullish Case: ASML's upcoming technological advancements and robust demand from AI-related markets create significant upside potential. The options market indicates a positive sentiment after recent volatility adjustments, with implied volatility stabilizing around 30% as companies increase capacity.

Bearish Case: Recent earnings results have dampened market confidence, reflected in the 16% drop in stock price. Additionally, geopolitical tensions and export controls on advanced equipment could further restrict ASML's business, potentially leading to further declines.

Potential Outcomes:

• Upside Recovery (60% probability): Expect a bounce back to $750, driven by improved demand forecasts.
• Continued Decline (25% probability): Profit warnings lead to a drop to $650.
• Stagnation (15% probability): Sideways trading around $684, reflecting current market indecision.

Trading Oracle: Consider initiating a bullish debit spread by buying ASML $700 calls and selling $720 calls expiring in 30 days. This capitalizes on the upward potential while managing risk due to the anticipated stability in implied volatility, presenting a favorable risk/reward ratio especially as sentiment improves. High probability of profit combined with favorable volatility conditions make this strategy attractive.

November 26, 2024