These bottom feeder plays can be difficult because they do not have established trends like momentum plays. Unfortunately, a momo is not who I am. A bottom feeder is who I am and so those are the things I look for. Frequent traders should be aware that a bottom feed is not necessarily right for their purposes.
Preamble behind us, we can now move on. Applied Materials (AMAT) is a major Semi Equipment company that broke above a daily trend line in early October, got above the SMA 50, broke to new recovery highs, started to get peppy and then reversed itself back to a test of the breakout line (support #1). There is more support at 15.50 with the SMA 50 and lateral support.
The weekly chart shows the 2015 downtrend channel broken to the upside, MACD crossed up and RSI rising above its EMA 20. Those are minor positives. In stopping at the Bollinger mid point (MA 20), it was at a logical place for a pullback.
What bothers me about a trade in this laggard is how extended the Semiconductor index itself is. So if I am going to consider buying AMAT I am going to consider taking profit on SMH and see if AMAT can’t do a little catching up.
Alternatively, this could just be put on radar and watched and not so much viewed as a trade, but more a holding should the Semi sector continue firm for longer than the bounce rally in the stock market. I think I am going to add it with a tight stop, but swap out SMH, which has run quite a bit.
Buy Target: Lateral breakout re-test at current level or a failure of that level and test of the SMA 50 at around 15.50. This would still have AMAT above the downtrend channel line.
Sell Target: 17.50 to 18.
Stop Loss: Below 15.50 for a strict stop, or as suits risk tolerance. I would not recommend holding below 15.
A reminder that chart based NFTRH+ updates are technical trade setup ideas, which may not be revisited as the buy, sell, stop parameters are already noted. They are meant as a starting point for further research if interested. I will not personally buy every item highlighted and will sometimes sell – without prior notice (because this takes time and resource away from NFTRH’s main functions) – any item that I do buy, below target, which is something I often do as a trader. Also please be aware that I am not a fundamental stock analyst. Due diligence is your responsibility.