Running my scans over the last few nights
, there have been a number of semiconductor companies on the
bullish list. One that stood out was
Applied Materials (
. While it was on the daily bullish scan, it was the weekly chart
that caught my attention, along with the sentiment
As with many
I have featured over the last few weeks, AMAT is in an upward
sloped trend channel. The stock ran into resistance in recent
weeks at the upper rail of the channel and pulled back as is the
case with most stocks. The stock hasn't reached the lower rail of
the channel yet, but it isn't that far away either.
The other thing that stood out on the weekly chart was the
pattern in the 10-week
over the last year and a half. Each time the indicator has been
in the vicinity of the 50 level, the stock has rallied. In three
of the four instances, the stock rallied at least 20% and in the
fourth case it rallied just over 9%.
With the stock being near its high for the past 10 years, I
decided to look at the monthly chart as well to make sure there
weren't any immediate resistance levels that could come into
play. Looking back, the nearest layer of resistance from a former
high is up at $21.85, which is 15% above the current level. This
is a good time to point out how you want to look at multiple
charts. Don't just look at the daily and no other charts, or
don't just look at the weekly chart. You have to look at
different timeframes to make sure you get the whole picture of
what is going on.
Turning our attention to the sentiment toward Applied
Materials stock, we see a certain amount of skepticism. The short
interest ratio is currently at 5.0 which is leaning toward the
moderately high level. Not only is the current reading the
highest it has been in the past year and the number of shares
sold short has doubled since December.
The analysts are also moderately
on the stock with 11 of the 21 analysts that follow the stock
having it rated as a "h0ld" or a "sell". This leaves plenty of
room for upgrades.
The fundamentals are pretty strong for Applied Materials stock
as well. The company's EPS rating in Investor's Business Daily is
an 89 which means that it has performed better than 89% of the
publicly listed companies from an earnings standpoint. Over the
last three quarters, AMAT has averaged earnings growth of
The bottom line for Applied Materials stock is that there is
more upside reward than there is downside risk at this point in
time. I look for the stock to gain at least 15% or more in the
next few months. A close below the lower rail of the channel
would be a clear sign to exit the trade.
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