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This semiconductor equipment stock just hit new 18-month lows as it breaks through the bottom of its trading range.

New Bearish Plays

Applied Materials - AMAT - close: 15.17 chg: -0.42 stop: 16.11

Company Description:

Applied Materials, Inc., headquartered in Santa Clara, California, is the largest supplier of equipment and services to the global semiconductor industry. (source: company press release)

Why We Like It:

Look out below! We had AMAT on our watch list this past weekend for a breakdown below support near $15.50. We didn't have to wait long. An earnings warning from chipmaker Infineon and a 1.6 percent drop in the SOX semiconductor index was enough to push AMAT over the edge. The stock is now hitting new 18-month lows and falling through the bottom of its six-month trading range. With volume coming in above average on today's decline this looks like a technical breakdown we can short. AMAT's weakness looks even more compelling when you consider that Smith Barney came out in defense of this stock just this morning suggesting investors buy the stock at current levels. The market obviously disagrees at least for the short-term. The Point & Figure chart shows a bull-trap pattern and a drop under $15.00 should produce a new sell signal. We want to target a drop toward the $13.50-13.00 range and we want to exit before AMAT's mid-February earnings report.

Annotated Chart:

Picked on January 24 at $15.17
Gain since picked: - 0.00
Earnings Date 02/16/05 (unconfirmed)
Average Daily Volume: 35 million


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