False Upside Breakout for Applied Materials?

Applied Materials (AMAT) made an upside breakout recently but prices are retreating today. This pullback and some divergences are suggesting that the breakout may have been false -- something that does happen from time to time. Let's review the latest charts and indicators to try, if possible, not to be "whipsawed."

In this daily bar chart of AMAT, below, we can see that prices have been unable to close above $60 for several months. Prices finally closed above $60 the other day but volume did not expand. With pretty much any or should I say all breakouts chartists and technical analysts like to see volume confirm the move. If you have trouble reading the volume histogram below the price chart the daily On-Balance-Volume (OBV) line has been flat and did not move up to confirm the price breakout. In the lower panel is the slow stochastic indicator. This indicator is in overbought territory above 80 and is making a lower high when prices make a higher high - a bearish divergence....148 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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