I have been watching Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report all week, hoping to see a potent monthly-up rotation over the May high.
We got just that on Thursday, as the shares jumped 7.3% on the day. It helped lead a rally in chip stocks, as Nvidia (NVDA) – Get NVIDIA Corporation Report also did well, gaining 6.9%. (Here’s the Action Alerts PLUS team’s take on Nvidia, by the way).
AMD stock not only rotated over the prior month’s high, it also held a key support level. All this action follows earnings from about a month ago, when the chipmaker reported better-than-expected earnings and strong guidance.
What does that have to do with this week’s breakout?
AMD’s strong quarterly results helped stabilize the stock’s decline, as the shares were down almost 50% at the time. It also gave reinforced investor confidence in AMD’s solid business.
Since then, traders have been calling AMD a go-to trading vehicle in tech — an area that’s quite limited when it comes to quality setups at the moment.
Despite yesterday’s impressive action, AMD shares were down as much as 3.6% on Friday after the market sold off following the jobs report and after Tesla’s (TSLA) – Get Tesla Inc Report Elon Musk made some comments about the economy.
Do we have a false breakout on our hands, or are traders getting a second chance in AMD stock?
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Trading AMD Stock
This is a beautiful chart — and that’s the first time I’ve said that in a while.
Look at last week’s action, which pushed AMD stock back above the critical $100 level, as well as the 10-day, 21-day, 50-day and 10-week moving averages. This was a huge achievement that seemed to go unnoticed by many investors.
On the last day of May, AMD made its high for the month. It then consolidated above all the key levels laid out above, then burst through not only the May high but also downtrend resistance (blue line) on Thursday.
It was a picture-perfect breakout.
The move sent AMD stock right to the 61.8% retracement, which for many traders was a trim spot, and rightfully so.
With today’s action, we have AMD bouncing between the 61.8% retracement and the monthly-up rotation spot. For late buyers, this dip provided them a second chance to go long AMD and they may further get that chance in the hours and days ahead.
If that’s the case, see to it that AMD stock holds up over $99. Below that and it really starts to lose its luster.
If it can take out this week’s high, bulls’ attention will shift to the 200-day up near $117. Above that and the $125 area is possible.
Source: https://www.thestreet.com/investing/trading-advanced-micro-devices-amd-stock-breakout?puc=yahoo&cm_ven=YAHOO&yptr=yahoo