Are Semiconductors Headed Lower?

Despite a reduced outlook, Applied Materials (AMAT) reported a 29% increase in sales and earnings per share of $1.22 this quarter; beating analyst expectations in both aspects. Investors may have been looking for more from the stock because it was trading lower after the report in the post-market session. This isn't likely to be good news for a group already struggling to impress traders.

AMAT Could Find Short-term Support at the Bottom of the Channel

The semiconductor group tends to be correlated, so disappointment around AMAT's outlook is likely to negatively affect stocks like Micron (MU), NVIDIA (NVDA), and Intel (INTC) in the short-term. The impact of a reduced outlook and jaded investors may be temporary as the stock nears support.

Fundamental trends are still intact with gross profit margins increasing from 46.3% to 46.7% compared to the same period last year. If general market sentiment improves, support for AMAT could come into play near $47.67 per share. Growth estimates can change quickly if worries about international trade and a stronger dollar fade while the stock drops.