ASML Holding's performance shock caused a huge disturbance! What signals did the market overlook? (2024.10.17)

Hello everyone, this week's 【Technical Tracking】 will analyze the Dutch lithography machine giant - $ASML Holding(ASML.US)$The extreme ultraviolet (EUV) lithography machine developed by ASML Holding represents the top manufacturing technology in the chip industry. The company is also seen as one of the barometers for semiconductor development. However, against the backdrop of the booming high-end semiconductor industry driven by AI, ASML released a disappointing earnings report that momentarily shook the US stock market.

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On October 15, 2024 (Tuesday), ASML had a "mix-up" regarding its earnings release. The third-quarter report, which was supposed to be officially announced on Wednesday, was leaked a day early on the company's official website due to a "technical glitch." The key point is that the earnings guidance provided by the company was very poor, catching investors off guard.

ASML expects its revenue in 2025 to be between 30-35 billion euros, falling short of FactSet Analyst's average expectation of 35.8 billion dollars. After this guidance was released, the market immediately responded with a sharp drop. ASML's stock price closed down 16% on Tuesday, dragging the entire semiconductor sector down about 5%!

ASML's CEO attributed the problems to traditional sectors, such as declining demand in the Cars and Consumer Electronics industries, leading to a downturn in the global semiconductor market, with recovery times slower than expected. However, he also emphasized that the emerging AI field is still developing rapidly and has enormous growth potential.

In the investor conference call on Wednesday, ASML's management pointed out that the continued downturn in the semiconductor market will lead to a decline in sales of lower-technology deep ultraviolet (DUV) lithography machines in the Chinese market. But they shifted their tone, stating that AI has brought hope to the market and maintained an optimistic attitude towards AI.

Overall, although ASML's performance caused a huge shock to the entire chip sector, the issues exposed are confined to the traditional Consumer Electronics field, while the emerging AI sector still has a promising outlook.

Technical Analysis

Trend analysis:

From the weekly chart, from October 2022 to July 2024, ASML Holding's stock price has increased by over 200%, reaching a historic high of 1108 USD. Analyzing through the Fibonacci retracement line (golden ratio), the stock price has now retraced more than 50% of the past two years' upward trend after hitting the historical high, which is considered a moderate market correction.

From the daily chart, ASML Holding's stock price is currently in a downward trend, having retraced 37% from the July high. After the company released its third-quarter report, the stock price plummeted for two consecutive days, reaching a 10-month low, exacerbating the downward trend observed in recent months.

Indicators interpretation:

● ASML Holding's stock price is below the major moving averages (MA), including the 50-day moving average and the 200-day moving average. The former fell below after the stock price crashed following the third-quarter earnings release, highlighting a sudden shift in market sentiment from bullish to bearish.

● The MACD indicator shows a bottom divergence, where the stock price has consecutively set new recent lows, but the MACD indicator has not synced to create new lows; instead, it has slightly shown an upward trend. This indicates that there is some bullish force in the market, and there may be a chance for a short-term upward rebound.

● The RSI indicator is approaching the oversold boundary at 30, showing initial signs that the stock price may be oversold in the short term.

● Volume has surged unusually for two consecutive days, highlighting the strong selling pressure that emerged in the market after the third quarter earnings release.

Overall, ASML Holding's stock price fell sharply for two consecutive days after the third quarter earnings release, with market sentiment quickly turning negative, resulting in huge selling pressure. For aggressive investors, there are initial signs indicating a potential short-term rebound opportunity in the market, making it appropriate to bet on a price rebound. However, for more conservative investors, it's advisable to observe and wait for clearer market signals, such as waiting for volume to return to normal levels before making further investment decisions.

This content discusses technical analysis; other methods, including Fundamental Analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

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