Applied Materials Posts 4.65% Rally as Bullish Reversal Pattern Emerges After 3.16% Drop

Candlestick Theory

Applied Materials (AMAT) has exhibited a bullish reversal pattern in recent sessions, with the most recent 4.65% rally forming a strong bullish engulfing candlestick on November 5, 2025. This pattern suggests a potential short-term trend reversal from bearish to bullish, particularly as it follows a 3.16% decline on November 4. Key support levels are identified at $230.19 (November 4 low) and $227.64 (October 28 close), while resistance is clustered around $241.91 (November 5 high) and $243.50 (a psychological round number). The price action indicates confluence between candlestick strength and critical support/resistance levels, enhancing the probability of a sustained upward move.

Moving Average Theory

Short-term momentum aligns with bullish signals, as the 50-day moving average (calculated from the 2025-08-07 to 2025-11-05 data) is trending upward and currently sits below the 200-day MA, indicating a potential acceleration in the uptrend. The 100-day MA further reinforces this, as the price closed above it on November 5. However, the 200-day MA remains a critical threshold; a break above this level would confirm a long-term bullish bias. The current crossover of the 50-day and 100-day MAs suggests a narrowing of short-term volatility, favoring continuation of the recent rally.

MACD & KDJ Indicators

The MACD histogram has expanded positively in the past three sessions, reflecting growing bullish momentum, while the signal line crossed above the zero level on November 5, supporting a long bias. The KDJ (Stochastic) oscillator, however, shows a mixed signal: the %K line reached an overbought level (above 80) on November 5, suggesting a potential pullback, but the %D line remains in neutral territory. This divergence implies caution, as overbought conditions may not immediately trigger a reversal if the broader trend remains intact.

Bollinger Bands

Volatility has expanded sharply in the past week, with the November 5 close at $240.89 nearing the upper band. This suggests heightened buying pressure and potential exhaustion of the current rally. The contraction of the bands in mid-October (e.g., October 29–31) preceded the recent breakout, indicating a period of consolidation followed by a directional move. If the price closes above the upper band, it may signal a continuation of the uptrend, but a retest of the lower band ($223.10 on October 31) could act as a filter for short-term traders.

Volume-Price Relationship

Trading volume surged on the November 5 rally, with 7.23 million shares traded—a 12.3% increase from the prior session. This volume validates the strength of the price move, as higher participation typically correlates with sustainable trends. However, the volume on October 30 (7.32 million shares) also spiked during a 1.36% decline, highlighting a potential bearish divergence. The recent volume surge supports the bullish case but should be monitored for signs of exhaustion if the price stalls near resistance.

Relative Strength Index (RSI)

The 14-period RSI closed at 78.3 on November 5, entering overbought territory but not yet exceeding 80. Historical data shows the RSI has not been below 30 since mid-2025, indicating a lack of oversold conditions to trigger a mean reversion. While the current overbought level may caution against immediate overextension, the RSI’s alignment with the MACD’s bullish momentum suggests the uptrend could persist until a divergence emerges. Investors should watch for a bearish crossover in the RSI if the price fails to make higher highs.

Fibonacci Retracement

A key Fibonacci retracement level at $233.1 (October 31 high) has acted as a dynamic support zone, with the price rebounding from this level on October 30 and again on November 5. The 61.8% retracement level at $237.71 (October 3 close) is currently being tested as a potential resistance-turned-support. A break above this level would target the $243.50 psychological barrier, while a failure to hold above $233.1 could trigger a retest of the $220.56 (October 22 low) level.

Backtest Hypothesis

The proposed RSI-based strategy (buying below 30 and selling above 70) would have executed no trades from 2022 to 2025-11-05, as the RSI did not dip below 30 during this period. While three overbought signals occurred (e.g., 2025-11-05 RSI at 81.71), the absence of corresponding oversold entries invalidated the strategy’s mechanics. This highlights a critical flaw in relying solely on RSI for AMAT, as the stock’s strong uptrend has limited oversold scenarios. A modified approach incorporating Fibonacci levels and moving average crossovers may yield better results, particularly given the confluence of bullish signals observed in recent sessions.