Why We Bought Applied Materials Ahead Of This Week’s Big Gains

macro photography of black circuit board

On the morning of March 26, semiconductor stock Applied Materials (AMAT) moved through its original breakout pivot and triggered a valid buy entry.

We mentioned the $AMAT breakout in the swing trader chatroom at 9:47 am ET, while the stock was trading near the $123.50 level.

For members who missed the initial buy entry, we also called out a pullback buy entry around 11:00 am ET (near the $124.50 area).

By the close, Applied Materials was 4% above the initial breakout entry and 3% higher than the pullback entry.

We liked AMAT due to its tight trading range above the rising 50-day moving average, with the price action hugging the rising 20-day EMA the past few weeks.

The March 26 breakout in AMAT was confirmed by a pick-up in volume, which finished well above its average level (a bullish sign of institutional accumulation).

The daily chart below shows the setup at the end of the breakout day:

The March 26 breakout in $AMAT was also a rally to fresh all-time highs.

As explained in 3 Proven Ways to Know When Stocks may be Forming a Significant Bottom, stocks that rally to new highs, while the Nasdaq is in correction mode, often become the next leadership stocks when the bull market returns.

The relative strength line (bottom panel on the chart above) plots the daily price of $AMAT vs. the S&P 500 Index.

It was bullish that the price and relative strength moved in sync to new highs. The price action that followed the previous breakout was also a big clue that the stock had leadership potential. Below, notice the strong uptrend after the last breakout led to a gain of +80% in just a few months:

Applied Materials is easily one of the top, highly liquid movers in the semiconductor sector. AMAT also boasts strong IBD ratings, a key element of any CAN SLIM-based trading strategy:

IBD Ratings for $AMAT

  • Relative Strength Rating 91 (now) was > than 80 prior to breakout
  • EPS rating – 94
  • Composite Rating – 99
  • Accumulation/Distribution Rating – A
  • Up/Down volume ratio – 1.5
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Disclaimer: Past results are not necessarily indicative of future results. There is a high degree of risk for substantial losses in trading securities. All data and material on this website ...

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