Applied Materials, Inc. (AMAT) shares briefly rose more than 2% on Monday after Citi maintained its buy rating and raised its price target from $70 to $78, which represents a 40% premium to Friday’s closing price. The move comes after Apple, Inc. (AAPL) CFO Luca Maestri suggested that NAND and DRAM memory prices would move lower going into 2019 as weaker demand helps alleviate chronic supply issues.
Citi analyst Atif Malik believes that weak NAND memory spending concerns are largely priced into the sector and suggested that the second half of the year could be a good time to buy equipment stocks ahead of first quarter shipments next year. In addition to Applied Materials as a top pick in the group, the analyst recommended shares of KLA-Tencor Corporation (KLAC), MKS Instruments, Inc. (MKSI) and ASML Holding N.V. (ASML) as other opportunities. (See also: The Industry Handbook: The Semiconductor Industry.)
From a technical standpoint, Applied Materials stock has experienced a strong rally since breaking out from its pivot point and 500-day moving average at around $52.00 earlier this month. The relative strength index (RSI) remains in neutral territory with a 58.46 reading, but the moving average convergence divergence (MACD) experienced a bullish crossover earlier this month and remains in a robust upswing moving into this week.[Check out Chapter 4 of the Technical Analysis course on the Investopedia Academy to learn more about supplemental technical indicators like the RSI and the MACD]
Traders should watch for a breakout from upper trendline and 50-day moving average resistance levels to re-test prior highs near R2 resistance at $62.60. If the stock fails to break out, traders should watch for a move back down to the pivot point and 200-day moving average near $52.00 or a move to retest lower trendline support at around $49.00. Currently, the technicals are favoring an ongoing bullish trend. (For additional reading, check out: Applied Materials Stock Could Break Out on Institutional Demand.)
Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.