To say that Advanced Micro Devices, Inc. (NASDAQ:AMD) has been on a wild ride over the past 25 years would be an understatement. Let’s look at a quick history of AMD stock:
Shares traded below $2 in 1990 before rallying to nearly $50 a decade later. Within two years, AMD stock was as low as $3.10, and while the stock climbed above $42 in 2006 it once again failed to hold on to that rally.
By the time the financial crisis rolled around in 2008, shares were right back below $2.
Since then, the semiconductor firm has been making a solid attempt to get back into the double digits. After falling to a multi-decade low of $1.61 last year, AMD stock has gone on an impressive rally.
And that brings us to more recent action.
The latest up-leg came after the election, when AMD soared as much as 48% from its Nov. 10 low of $6.22. The stock hit a high of $9.22 on Nov. 21, but it appears that the one-year rally may finally be coming to an end — or at a minimum we’re seeing the start of a near-term correction.
AMD seemed to plateau before trading just a penny above that resistance to $9.23 this past Tuesday, but then the selling picked up again. The stock formed a double-top pattern, and since then has pulled back nearly 10% from its peak. There could be even more selling on the horizon.
I believe there are several factors at play here.
First, the entire semiconductor space is struggling right now, with the PHLX Semiconductor Index (SOX) down 6% from a 16-year high.
Plus, AMD’s relative strength index (RSI, located at the bottom of the chart) is crossing out of overbought territory and into the neutral zone, which is a sign that the current trend is shifting to bearish.
The area to watch on the chart is important support between $7.50 and $7.70. That’s where I would look to potentially buy AMD stock.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.
