Applied Materials, Inc. (NASDAQ: AMAT) shows signs of an upcoming price surge according to its latest charts. Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. It operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets.
The stock was also a part of our recent watchlist.
Bullish Indications
#1 Consolidation Area Breakout: The daily chart shows that the stock was trading within a consolidation area for the past several days. This is marked in the daily chart as a pink color rectangle. Currently, the stock has broken out of this consolidation area. Once a stock breaks out from a consolidation area, it usually moves higher.
AMAT – Daily Chart
#2 Above MAs: The stock is currently trading above its 50-day as well as 200-day SMA and had moved higher with high volume. This indicates an overall bullishness of the stock.
#3 Bullish ADX and DI: The ADX indicator shows bullishness because the +DI line and the ADX line are above the -DI line and the ADX line is currently above the +DI and -DI lines.
#4 Flag Pattern Breakout: As seen from the weekly chart, the stock was in a strong uptrend after which it started consolidating and was in a narrowing range. This is a classic flag pattern and is marked in the chart in purple color. A flag is a continuation pattern. Whenever a stock breaks out of this pattern, it typically continues its previous trend (uptrend in this case). Currently, the stock has broken out of the flag pattern. This is a possible bullish sign.
AMAT – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#6 MACD above Signal Line: As you can see from the weekly chart, the MACD line (blue color) is currently above the signal line (orange color). This indicates a possible bullish bias.
Recommended Trade (based on the charts)
Buy Price: If you want to get in on this trade, the ideal buy level for AMAT is above yesterday’s high, which translates to a price of around $151.60.
TP: Our target prices are $158 and $164 in the next 1-5 months.
SL: To limit risk, place a stop loss at $147.40. Note that this stop loss is on a closing basis.
Our target potential upside is almost 4% to 8% in the next 1-5 months.
For a risk of $4.20, our target rewards are $6.40 and $12.40. This is almost 1:2 and 1:3 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the consolidation area breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in the sector.
Happy Trading!
— Tara
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