You’ve probably heard the word nanotechnology before, but can you define it?

Simply put, nanotech involves creating systems built on a molecular scale.

While the industrial practice is small, nanotech manufacturing is big business. It’s also a very profitable one.

What’s more, I’ve found a nanotech company that has the added benefit of being the largest chip equipment producer in the world. This company spans almost every segment of the chip sector, providing chip solutions for the semiconductor, solar and software industries.

This California-based producer is also an important player in the flat panel display market — used in TVs and smartphones — and is now becoming a recognized competitor in the growing LED lighting market.

Slated to release first-quarter 2011 results on February 16, analysts project the company will achieve a solid revenue and earnings gain because of its semiconductor dominance.

With attractive valuation and technical strength, traders may want to consider stocking up on shares of Applied Materials (Nasdaq: AMAT).

Technically AMAT appears strong. For the past two years, the stock has been in a Major uptrend.

Hitting a low of $10.21 in August 2010, AMAT broke above previous resistance at $12 in October 2010 and has been on an accelerated uptrend (labelled on chart above) ever since.

Forming a bullish ascending triangle pattern — marked by the accelerated uptrend line and resistance near $14.61 — AMAT bullishly broke this pattern in early January 2011.

With no near-term resistance in sight, the stock could continue to soar.

The measuring principle for a triangle, calculated by adding the height of the triangle to the breakout level, projects a minimum price target of $19.01 ($14.61 – $10.21 = $4.40; $4.40 + $14.61 = $19.01). This is slightly below the stock’s 2007 peak of $21.59.

Fundamentally, Applied Materials has a strong growth outlook.

For the upcoming quarter, analysts project revenue will increase 39.5% to $2.6 billion, from $1.9 billion in the year-ago quarter. Driven by healthy gains in the semiconductor industry and its launch into the LED market, analysts expect the company’s full-year 2011 revenue will increase 4.2% to near $10 billion, compared with $9.6 billion in the previous year. By 2012, analysts project revenue will inch up a further 2.3% to $10.2 billion.

The earnings outlook is equally strong.

With continued strength in the semiconductor and LED markets, analysts estimate first-quarter earnings will surge by 154% to $0.33 a share, from $0.13 in the year-ago period. For the full 2011 year, analysts expect earnings will increase more than 21% to $1.25, from $1.03 last year. By 2012, earnings are projected to rise a further 7% to $1.34.

In addition to fundamental growth, AMAT is also fairly valued in comparison to its competitors, Lam Research (Nasdaq: LRCX) and KLA-Tencor (Nasdaq: KLAC).

While AMAT’s price-to-sales (P/S) ratio is about 2.2, LRCX has a higher P/S ratio of 2.5, while KLAC’s is 3.4. (Typically, the lower the P/S ratio, the better valued the company.)

Additionally, AMAT’s price-to-book (P/B) ratio is 2.7, but KLAC’s P/B is higher at 3.2 and LRCX’s P/B is higher still at 3.5. (Generally, the lower the P/B ratio, the more attractively valued the company is.)

AMAT also offers an annual dividend of about 1.8%.

Action to Take –> Given that the stock is fairly valued in comparison to its competitors, shows fundamental growth potential and appears technically strong, you could go long on the stock and expect a potential 18% gain. Here’s how…

Buy the stock at the opening of trading on Monday, January 31. Set a stop-loss at $13.61, near a shelf of support. As calculated by the measuring principle, your target will be $19.01. If all goes according to plan, it could be a quick and easy gain of roughly 18%. The risk/reward ratio on the trade is about: 1.20:1.