Shares of Applied Materials Retreat, Leaving the Bulls Frustrated
Despite an impressive report, the semiconductor firm is trading lower with the charts pointing to the downside.
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Semiconductor firm Applied Materials AMAT is trading lower Friday despite their Q3 results surpassing estimates Thursday night. Traders seem to be more focused on the fact that the company's China demand was moderating.
Let's check out the charts and indicators.
In this updated daily bar chart of AMAT below, I see a bearish setup. Prices broke their uptrend in July and tumbled lower into early August. August has seen prices recover a bit but they have stopped short of the underside of the declining 50-day moving average line. The On-Balance-Volume (OBV) line stopped its rise in March and has subsequently moved lower into early August. The Moving Average Convergence Divergence (MACD) oscillator fell below the zero line in July but has recently crossed to the upside for a cover shorts buy signal.
In this weekly Japanese candlestick chart of AMAT below, I can see that prices rallied more than three-fold over the past two years or so. Prices began to reject the highs in early July and skidded lower to retest the rising 40-week moving average line. Prices have bounced back in the latest candle entry but that rally is being questioned today. The weekly OBV line started to turn lower in July while the MACD oscillator is pointed down.
In this daily Point and Figure chart of AMAT below, I can see a potential price target in the $227 area. Not a breakout to a new high.
In this weekly Point and Figure chart of AMAT below, I can see a big downside price target in the $89 area.
Bottom line strategy: AMAT could continue to rally but the recent price action has me looking to the downside and not the upside.
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