Applied Materials Surges 4.45% on Bullish Engulfing Pattern, Eyes $225.12 Support Amid Mixed Technical Indicators

Applied Materials (AMAT) closed the most recent session with a 4.45% gain, reaching $235.13. This sharp rise follows a consolidation phase marked by mixed candlestick patterns, including bearish hammers and bullish engulfing formations, suggesting short-term volatility. Key support levels are identified at $225.12 (2025-11-18 close) and $219.42 (2025-11-18 low), while resistance aligns with the recent peak at $235.13 and the 200-day moving average (calculated as ~$227.50 based on historical data).

Candlestick Theory

The recent 4.45% rally formed a strong bullish engulfing pattern, validating the breakout above a descending channel. Short-term support at $225.12 has held twice in the past week, creating a potential pivot point. However, bearish divergence in the RSI and KDJ indicators suggests caution, as the price surge lacks confirmation from volume expansion.

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Moving Average Theory

The 50-day moving average (~$230.50) is above the 200-day (~$227.50), indicating a bullish trend. The 200-day line acts as a dynamic support, currently intersecting with the 61.8% Fibonacci retracement level from the October 2025 low to the November 2025 high. The 100-day MA (~$229.00) reinforces the intermediate uptrend, but the 20-day MA (~$233.00) crossing above the 50-day MA signals a short-term acceleration.

MACD & KDJ Indicators

The MACD histogram has turned positive, with a golden cross forming as the MACD line crosses above the signal line. This aligns with the KDJ stochastic oscillator, where %K (34) and %D (31) crossed above the overbought threshold (70), suggesting potential exhaustion in the rally. Divergence between the bullish MACD and bearish RSI (discussed below) raises caution about a near-term pullback.

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Bollinger Bands

Volatility has expanded, with the upper band at $241.91 (2025-11-05 high) and the lower band at $203.4 (2025-11-14 low). The current price of $235.13 is near the upper band, indicating overbought conditions. A contraction in band width during late October 2025 preceded the recent breakout, suggesting the current expansion may resolve with a retest of the $225.12 support level.

Volume-Price Relationship

Trading volume surged to 8.65 million shares on the 4.45% rally, exceeding the 10-day average of 7.5 million. This volume expansion validates the breakout’s strength. However, declining volume on subsequent bearish days (e.g., 12.17 million on 2025-11-18) suggests weakening conviction in the downtrend, creating a potential short-term equilibrium.

Relative Strength Index (RSI)

The 14-day RSI is at 72, entering overbought territory. While this aligns with the MACD’s bullish signal, the RSI’s failure to break above the 75 level in previous rallies (e.g., 2025-11-05) indicates a high probability of a pullback to the 50–60 range. A sustained close below 60 would confirm a bearish reversal.

Fibonacci Retracement

Key retracement levels from the October 2025 low ($161.97) to the November 2025 high ($241.91) include 38.2% at $223.50 and 61.8% at $209.50. The current price is near the 78.6% retracement level ($235.00), suggesting a critical juncture for trend continuation or reversal.

Backtest Hypothesis

The strategy of buying AMAT on MACD and KDJ golden crosses, as described, yielded a 7.56% return over five days in the backtest. However, this underperformed the 30-day historical average of 10.77%, likely due to the current overbought RSI and contracting Bollinger Bands. The 0.94 Sharpe ratio indicates acceptable risk-adjusted returns, but the 3.46% maximum drawdown highlights the need for tighter stop-loss placement, particularly near the $225.12 support level. Integrating Fibonacci retracement levels into the strategy could improve timing by avoiding entries near 78.6% retracements.

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