Applied Materials Breaks Above $200: Is $240 the Next Stop?

by SIACharts.com

SIA Charts’ relative strength rankings assist investors in identifying stocks that are outperforming their peers or index benchmarks. Outperformance typically indicates positive investor expectations for a company or sector. The rankings not only help investors identify which stocks in a universe are outperforming and underperforming against their peers, but also when relative performance trends are changing. Earlier this week we highlighted the Electronics and Semiconductor name ASML Holdings. Today we are going to highlight another Semiconductor name exhibiting outperformance of late. To illustrate this, let’s review the shares of Applied Materials Inc. (AMAT). Applied Materials (AMAT) recently re-entered the Favored Zone of the SIA S&P 500 Index report on September 24 at a price of $201.44. The shares are showing strong relative strength. The stock’s movement up the SIA S&P 500 report, gaining 15 spots in the last week, 329 in the last month, and 110 in the last quarter, exemplifies the consistent increase in money flow into the shares in recent weeks. Currently, the shares reside in the 99th spot out of 505 positions in the report. In looking at the attached candlestick chart of AMAT, the shares bottomed out in early April at just above $120 when the bulls took charge and the accumulation phase took over. After a nice move to just under the $200 round number, the shares pulled back but found a higher low at the $160 level, confirming the recent uptrend is intact as the shares made a new higher high, breaking above the $200 round number last week. There is some resistance forthcoming in the $210 area, where the shares bumped their head back in early 2024 and late 2024, but if the shares break above this upcoming $210 area, they seem poised to potentially reach their all-time highs of $240.00.

The benefit of looking at Point and Figure Charts is that you can see more precisely the upcoming support and resistance points. In looking at the Point and Figure chart at a 2% scale for an investment-grade analysis, we see the shares have indeed bottomed out at the $127.94 area in April. A steady pattern of higher highs and higher lows has materialized, with a higher column of X’s forming in May and July, and now most recently last week, when the shares closed above $201.76. Another positive signal is that the shares broke above their long-term downtrend (red) line in July at the $190.12 level. We can see precisely the next level of resistance at $214.10, but if AMAT manages to break above that, the next resistance levels are $245.94 and $255.87, where its all-time high is located. To the downside, support is at its 3-box reversal of $186.39, and below that, in the $172 to $175.00 range. The shares currently exhibit a bullish Double Top pattern, and with an SMAX score of 8 out of 10, Applied Materials is exhibiting strong near-term strength against the asset classes. Also of note, AMAT is classified in the SIA Electronics and Semiconductor sector, which has a Favored rating within the SIA Stock Sectors report, indicating a positive sector backdrop for the name. Applied Materials is the world's largest supplier of semiconductor manufacturing equipment, providing materials engineering solutions to help make nearly every chip in the world. The firm's systems are used in nearly every major process step with the exception of lithography. Key tools include those for chemical and physical vapor deposition, etching, chemical mechanical polishing, wafer and reticle inspection, critical dimension measurement, and defect-inspection scanning electron microscopes.

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