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Applied Materials Stock Rebounds on Q2 Earnings Beat

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AMAT’s stock price momentum

Applied Materials (AMAT) stock fell 4.2% on May 13 after the United States increased tariffs on $200 billion worth of Chinese imports to 25% from 10% on May 10. On May 13, most chip stocks, including AMAT and its peers Lam Research (LRCX) and KLA Corporation (KLAC), were oversold as investors feared that higher tariffs would significantly impact semiconductor earnings.

At this point, AMAT and KLAC were trading below their 50-day moving averages and slightly above their 200-day moving averages. A stock’s moving average takes the average of its prices over a certain period of time to determine in which direction its movement is skewed. If the stocks had fallen below their 200-day moving averages, they would have gone into a technical downturn.

However, AMAT stock rose from May 14 onward as investors reacted ahead of its earnings release.

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AMAT’s stock price momentum

On May 16, AMAT reported better-than-expected earnings results for the second quarter of fiscal 2019 and maintained its full-year outlook, which eased investors’ fears about the effects of the trade war on the company. On May 17, AMAT stock rose as high as 6.3% before closing at $42.7, representing a rise of 2.5%. This rebound put AMAT back into a place of technical strength by positioning it above its 50-day moving average.

However, KLAC is still trading far below its 50-day moving average and remains oversold despite having higher profit margins than AMAT and LRCX. If KLAC falls further, it could enter into a period of technical weakness.

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