Today’s trade idea is looking in a group that you may already have a position in if you’ve been reading this column.
The semiconductors have been a focus here recently, and in fact; AMD is up more than 10% since it was recently recommended.
In addition, SMH, the sector ETF has a very bullish pattern. So there are more opportunities here.
Read below for today’s trade idea in this sector that is close to a big breakout level.
In the chart of Applied Materials (AMAT) below, you can see that the $45.50 level, which was the high of Wednesday has been a pivotal area. The highs in April were $45.75.
The chart also shows a consolidation that has been developing since April on top of the 200-day moving average.
This consolidation after a move from below to above the 200-day moving average is a bullish long-term pattern.
If AMAT trades over $46 it should be sufficiently above the base to break out.
The initial move on the breakout could easily be $7, which would put the target at $52-53. The $7 projection is a common technical calculation of taking the height of a good base as a projected first move out of it.
You may also have noticed that the $44 level has been a pivotal level. This can be used as a stop.
So with a buy trigger of trading over $46, and a stop under $44, and an expectation of a $7 move, this is a nice reward to risk trade.
Plus, if the market remains in a bullish mode, AMAT could go much higher than $7 over time.
For this reason, I’d look at this as a longer-term trade once it breaks out.
However, it does have to trade over $46 before it’s a good trade.
Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation