Applied Materials, Inc. (AMAT) shares fell about 4% during Friday's session after the company posted third quarter financial results. Revenue fell 14.4% to $3.65 billion, beating consensus estimates by $30 million, and non-GAAP net income reached 74 cents per share, beating consensus estimates by four cents per share. While the Q3 results were better than expected, CFO Dan Durn said that he still isn't ready to call the bottom of the cycle.

Analysts remain mixed on the company's prospects. Craig-Hallum analyst Christian Schwab downgraded Applied Materials stock from Buy to Hold and lowered his price target from $50 to $46, citing management's limited visibility into the timing or magnitude of the expected recovery and higher-than-expected operating expenses. Deutsche Bank analyst Sidney Ho raised his price target from $44 to $47, citing solid financial results with few surprises.

Analysts are equally mixed on the prospects for the memory sector over the coming quarters. Goldman Sachs upgraded Applied Materials to Buy from Neutral in late July and added it to the firm's Conviction List. While visibility is limited in the near term, disciplined supply-side actions from memory manufacturers and disruptions could improve supply and demand sooner than many analysts are expecting.

Chart showing the share price performance of Applied Materials, Inc. (AMAT)

From a technical standpoint, Applied Materials stock broke down from the 50-day moving average and a head and shoulders pattern before regaining ground later in the session. The relative strength index (RSI) remains neutral with a reading of 44.39, but the moving average convergence divergence (MACD) remains in a bearish downtrend. These indicators suggest that the stock could see more downside before reaching oversold levels.

Traders should watch for a breakdown from trendline support and the 50-day moving average over the coming days. If that occurs, traders could see a move lower toward reactions lows and the 200-day moving average at around $40.00. If the stock rebounds higher, traders could see a move higher to retest reaction highs of $47.50 and invalidate the head and shoulders pattern, although that scenario appears less likely to occur.

The author holds no position in the stock(s) mentioned except through passively managed index funds.