Another Breakout Coming In This Hot Sector

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.

https://lh6.googleusercontent.com/reOV-HbRarvHp_2JVHlgpEmMzO6zYFPD3LdCPTtbaqbHuSXkIdDOhKPvHLRIKkFdn-2kuTyXwJjYij9w7_iWRkA7FHnHqzoDmFffCfMqZc0Bxad3CqyyfBrwShpLsNi7_921LObC

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.

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily