Long
Applied Materials Inc (AMAT)
Friday, November 8, 2013
Company Symbol Industry Rating YTD % Gain
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Stock Rating:
The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest. Applied Materials Inc - Last 30 Days
Applied Materials Inc - Last 3 Months
Applied Materials Inc - Last 6 Months
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The Trade:
Applied Materials Inc (AMAT) offers an intriguing set-up to trade this morning. AMAT is a Semiconductors Equipment stock, and lookingat the greater industry of semiconductors ($SOX, XSD), it's easy to notice some price action similarities. Both AMAT and semis have exhibited considerable strength throughout 2013, maintaining long- and intermediate-term up-trends since the beginning of the year. While AMAT does share some correlation, it moves on its own enough to warrant trading the set-ups it creates.
Currently, AMAT is trading a painfully obvious range after a significant leg up on September 24th. But just because it's obvious doesn't mean it's useless! The low of the range is on a closing basis at $17.30, while the high is at $18.10. The low has been tested and has held on about ten separate occasions since the gap higher, while the high has been challenged but not broken through roughly same number of times. Thus, AMAT is trading a clearly defined range that has both strong support and the bottom and firm resistance at the top, which makes it an attractive opportunity from one end of the range to the other.
Currently, AMAT is priced at $17.50, which is near the low end of the range. The downside to $17.30 is -1.15%, while the upside to $18.10 is +3.42%, making the reward to risk ratio about 3 to 1 on a buy at current prices, and even higher on the reward side should AMAT manage to break above $18.10 on a closing basis.
While a +3.42% gain is not a "knock it out of the park" trade, AMAT's set-up is a no-brainer and is a relatively safe trade in terms of risk/reward. Trading a bit smaller might be a good idea here, especially in this toppy-feeling market.
One last thing worth noting is that AMAT reports earnings on November 14th after the close. Unless you're keen on gambling with earnings, if the stock does not make a move to $18 but is still above $17.30 when November 14th rolls around, it would be a good idea to sell the position before the close.
Trade Entry:
Buy at the current price (~$17.50).
Trade Exit:
At a close below $17.30 (Breakdown) / A close at $18.00 or above (Profit-Taking)
Company Profile:
Applied Materials Inc. (Applied) provides manufacturing equipment, services and software to the global semiconductor, flat panel display, solar photovoltaic (PV) and related industries. Applied's customers include manufacturers of semiconductor wafers and chips, flat panel liquid crystal displays (LCDs), solar PV cells and modules, and other electronic devices. These customers may use what they manufacture in their own end products or sell the items to other companies for use in advanced electronic components. Applied operates in four segments: Silicon Systems Group, Applied Global Services, Display, and Energy and Environmental Solutions. In November 2011, the Company acquired Varian Semiconductor Associates, Inc.
Disclosure:
At the time of publication the editor and affiliated companies own the following positions:
None
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