My Watchlist [123]: ASML... The Situation.
Hi everyone. Today I’ll be looking at another semiconductor stock for the first time:
ASML Holding N.V. (NASDAQ: ASML)
ASML has been trading in an ascending channel (in green) since 2020 and a marked up ascending channel (in blue) since 2023. The most notable sign of bearishness in ASML’s chart is that:
It has hit the top of the green channel for the first time since the 2021 high;
It has broken down from the secondary ascending channel for the first time with a bearish engulfing reversal candle (*requires weekly close for confirmation);
Bearish divergences have shown up on the RSI and Stochastic RSI with a bearish crossover occurring on the latter, suggesting the start of a move lower
In the short term, I am expecting continuation towards the 878-888.67 island gap. If there is any attempt at a bounce to reset the Stochastic oscillator on the daily, I am expecting a rejection at, or slightly above 979.99. This level is crucial as ASML’s prior ATHs in 2021 sits at 895.93, but it ultimately rejected the 878-888.67 area at that point time. A successful retest of this level could negate the bearish patterns on this stock.
However, structural breakdowns, particularly for trends that have held for at least a year or more, usually give rise to larger moves lower. I see ASML retracing back towards the 759.47-765.53 area in the coming months to retest its prior resistance between Jul-Dec’23.
Unless ASML reclaims its secondary channel or breaks out above the main channel, I am not bullish on it. The bears have drawn blood by creating a mega-sized island gap at 979.99-1,060.74.
In light of the unfavourable technical setup on ASML, I am initiating coverage on it with a SELL sentiment.
Sentiment: SELL (New)
Summary (with Price Targets - NFA):
Broke down from secondary ascending channel (in blue) with a bearish divergence setup
Measured move should be to retest prior highs at 759.47-765.53 area
Invalidation only happens if ASML can fill its bearish island gap at 979.99-1,060.74, reclaim its secondary channel, or break above its main ascending channel (in green)
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Looks like ASML is showing some bearish signals. Interesting breakdown from the secondary ascending channel. Keeping an eye on that 759-765 area for a retest. What do you all think?
FT wrote in-depth article about ASML and it very much confirmed our bear case.
Don’t rush, just sit tight and enjoy the show.