ASML Holding Share Price Poised for $50 Boost as Traders Buy the Dip
The semiconductor name broke out this week and investors seem to be buying the long-term prospects.
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October was a rough month for ASML Holding ASML. Disappointing earnings sent the stock tumbling $200 over two days. The company, which operates to something as close to a monopoly as one can be in the semiconductor industry, saw the last piece of its strong 2024 first-half run completely wiped off the board. Shares turned negative for the year.
Management tried to reassure Wall Street in the middle of November that its long-term look was still rosy. Shares rallied hard, gaining $40 quickly, but by the end of the day, half of the rally was gone. A day later, shares were lower than they had been when they started before management spoke.
ASML was clearly in the penalty box.
And while that was the case, buyers are now embracing the longer-term story around ASML and buying the dip.
Shares broke out on Tuesday, closing above a key resistance level, returning to the initial October bounce after the huge selloff. Additionally, it was the third green day in a row and the second close above that November pop on management’s reassurance.
Today, the 10-day exponential moving average (EMA) appears poised to close above the 21-day EMA. Since the summer, we haven’t seen the 10-day EMA above the 21-day EMA consistently.
A few traders may have PTSD from the last crossover which occurred right before the huge October earnings selloff. While that might keep some away, the selloff was not technically driven. Given management’s announcements in November, I don’t expect them to hit the market with bad news or negative guidance only a few weeks after bullish talks.
Another current technical support indicator is the bullish crossover on the long-term Full Stochastics indicator. This indicator is set up so I can ignore it most of the time. When the indicator is above 20 or below 80, I just watch the trend, but it doesn’t move me to act; however, I pay close attention when either of those levels is broken.
When the indicator is below 20, I watch for a bullish crossover (black line crossing above the red line). ASML did that on Tuesday. The last time this happened was in October 2023. Shares were trading around $600. Over the next nine months, they climbed $500, reaching $1,100 in July.
I don’t see ASML repeating that performance; however, I think we could see shares add $50 to $80 over the next two to three months. If the stock closed below $675, I’d move to the sidelines, but the upside versus the risk here is appealing and worthy of consideration.
At the time of publication, Byrne had no positions in any securities mentioned.
