Applied Materials stock price has remained in a deep bear market as it dropped by almost 25% from its highest level this year. AMAT has also formed two extremely bearish patterns, pointing to a potential crash after its earnings next week.
Applied Materials stock forms bearish patterns
On the daily chart below, we see that the AMAT stock price has been in a strong bearish trend in the past few months.
Notably, the stock has formed a bearish flag chart pattern, a popular negative sign in the market. This pattern is characterized by a long vertical and a rectangle, and often leads to a bearish breakout.
The stock has also formed a death cross pattern, which happens after the 200-day and 50-day Exponential Moving Averages (EMA) cross each other. In most cases, this pattern usually leads to a significant drop over time.
AMAT shares have moved below the 23.6% Fibonacci Retracement point. Therefore, there is a likelihood that the stock will have a strong bearish breakout in the coming days. If this happens, the stock could drop to the 50% retracement point at $162.90, which is about 15% below the current level. A crash below that level will bring the 61.8% retracement at $140 into view.
This view will become invalid if the stock moves above the key resistance point at $200. If this happens, the stock will rise to the upper side of the flag pattern at $220. Most importantly, a move above $220 could open the possibility of it jumping to the year-to-date high of $255.
AMAT earning ahead
This next important catalyst for the Applied Materials stock price will be its earnings, which are scheduled on November 14.
Analysts believe that the company’s revenue will come in at $6.95 billion, a 3.4% increase from the previous quarter. The firm is also expected to provide a bullish forecast for the fourth-quarter, with the revenue coming in at $7.22 billion.
AMAT’s annual revenue will be $27.12 billion, a 2.3% higher than what it made in 2023. Its business will then bounce back to $30 billion in 2025.
The most recent results showed that Applied Materials revenue came in at $6.78 billion, a 5% from the same period in 2023. Its operating margin jumped to 28.7%.
Most of its revenues will come from the foundry and logic business followed by DRAM and flash memory.
For starters, Applied Materials is a top semiconductor company that makes some of the most important solutions in the industry. Its solutions are used by some of the biggest companies in the industry like Intel, Samsung, Taiwan Semiconductor, and SK Hynix.
Its business is being boosted by the ongoing growth of industries like artificial intelligence and Internet of Things (IoT).
Analysts believe that the AMAT stock is fairly undervalued. It has a forward price-to-earnings ratio of 22.52, lower than the median estimate of 25.3. This undervaluation is mostly because Applied Material’s business is not growing as it used to before.
Read more: Applied Materials stock: Key AMAT levels to watch
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