Can Applied Materials Maintain Its Breakout After Earnings?

Applied Materials ran to new highs this week. Can it maintain momentum once the company reports earnings?
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Applied Materials  (AMAT) - Get Report has done great on the long side lately, rallying about 24% over the past 10 trading sessions.

Clearly, bulls have been in control. That’s particularly true as investors used the current rally to break the stock out to new highs.

The question now becomes whether Applied Materials can maintain that breakout after it reports earnings on Thursday after the markets close.

The recent rally was actually enough to propel the stock to new highs. Others like Lam Research  (LRCX) - Get Report and Teradyne  (TER) - Get Report also have enjoyed big runs to the upside, while also hitting new highs.

One might expect Applied Materials’ reaction to earnings to impact these stocks as well. Let’s look at the chart.

Trading Applied Materials

Daily chart of Applied Materials stock.

Daily chart of Applied Materials stock.

Applied Materials stock went on a strong run, climbing 33.3% from the October low to Monday’s high. That rally spanned just eight trading sessions, seven of which were gains. 

The lone red day? A 0.45% drop on Oct. 30.

In any regard, the stock was able to not only clear the $68 to $69 area, but is now holding this level as support.

This area rejected Applied Materials stock twice already this year, once in February before the coronavirus selloff hit and once in August when it beat on earnings estimates and raised guidance

Unlike the broader tech sector, shares topped out in mid-August rather than late September. However, like the Nasdaq and many of its components, shares also put in a lower high in October.

From here, I would love to see Applied Materials hold the $68 area and the rising 10-day moving average after earnings. If it can, it will be another bullish development for the stock.

Even if Applied Materials pulls back, it’s still healthy if it can hold the $65 level. Below that and it loses its luster in the short term, although it would still be considered healthy as long as it’s above the 50-day moving average.

On the upside, the 123.6% extension acted as resistance earlier this week. Clearing that mark and the current high near $76 would open up the stock for a potential run higher. It could possibly put the 161.8% extension in play up near $88.70.