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It May Be Best to Take Profits With Applied Materials Ahead of Earnings

The technical signals of the producer of semiconductor manufacturing equipment suggest a top reversal could be at hand.
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We looked at the charts and indicators of Applied Materials (AMAT) on Feb. 10, when we wrote, "I have absolutely no special knowledge of AMAT's upcoming quarterly figures, but I can say the charts and indicators of AMAT are mostly constructive and I would look for higher prices in the weeks ahead." The company is set to report its latest quarterly numbers after the close Thursday. 

Let's check out the charts again. 

In this daily bar chart of AMAT, below, we can see that prices have pushed higher since our Feb. 10 review. Prices are up threefold from their March lows. AMAT is trading above the rising 50-day simple moving average line and above the rising 200-day line, which intersects down at $70. The trading volume has been active and the On-Balance-Volume (OBV) line has risen to a new high with the price action. Buyers of AMAT have been and are more aggressive. The Moving Average Convergence Divergence (MACD) oscillator just crossed to the upside from above the zero line. This is a fresh buy signal. 

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In this weekly bar chart of AMAT, below, we see a strong picture. Prices have climbed fourfold from their 2018 double bottom around $30. Prices are in an uptrend above the rising 40-week moving average line. Trading volume has declined over the past 12 months. The weekly OBV line shows strength from October but still has not matched the price gains. This is a bearish divergence. The MACD oscillator is in a bullish alignment above the zero line with no signs of narrowing.  

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In this daily Point and Figure chart of AMAT, below, we can see that prices have reached their price target. Prices could head higher, but some technically oriented traders may be taking profits.  

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In this weekly Point and Figure chart of AMAT, below, we see a price target in the $156 area.  

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Bottom line strategy: Tuesday's candle pattern was a bearish gravestone doji (not shown). A bearish candle pattern here on Wednesday will be confirmation of a potential top reversal. Traders long AMAT should take some profits on their positions ahead of earnings

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