AMAT – Gap Down on Guidance – Right Down to Strong Support. . .
Applied Materials fell hard on guidance today.
Did AMAT stock get put on clearance sale with the drop?
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Whether or not the stock deserved to fall almost double-digit percentages on the day is subject to debate, but the important thing is it fell to a very strong support level – and the tech story continues to look good.
AMAT provides equipment and support for chipmakers. There are several reasons why chipmakers are going to see robust business in the coming months and years – AI, automation, blockchain, IoT, data, etc. – meaning Applied Materials’ customer base is ready and willing to do robust business with the company. As the automation and data gold rush continues, AMAT’s customers will be buying more and more equipment and services.
There’s also the 5G wildcard – while slow adoption of 5G technology doesn’t necessarily hurt AMAT’s business, a 5G tech connectivity boom would be a great boon to AMAT's prospects.
The technicals are as good a story as the fundamentals. Applied Materials fell from the low\mid $50’s to close around $49.50 (down a little more than 8%) on 5/18. Looking back on the chart, we can see that the $48 area provides a strong support floor. AMAT approached that support zone intraday as selling momentum pushed price lower during the early trading hours – and selling pressure as well as lackadaisical summer trading may see price through to lower levels in the coming week or two – but Applied Materials’ miss on expected guidance doesn’t change the overall situation of the company or the tech sector.
Gaps like these tend to fill. Look for price to trend higher as tech remains strong and the chip manufacturers continue to buy products and services from AMAT, and as traders take advantage of the early Memorial Day sale price of Applied Materials’ stock.
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