Is Advanced Micro Devices, Inc. (AMD) Stock on a Comeback?

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A few weeks ago, we said that it was “Do or Die Time” for Advanced Micro Devices, Inc. (NASDAQ:AMD). At that time, shares took a dive from earnings, rallied on rumors of a deal with Intel Corporation (NASDAQ:INTC) and fell when doubts came along. At that point, AMD stock was just above support and we weren’t sure if it would hold.

AMD Stock: Is Advanced Micro Devices, Inc. (AMD) Stock on a Comeback?

From our perspective, the bulls were still in control, but barely. If the $10 level were to fail, bears would seize control. That didn’t happen though, as AMD stock put together a more than 13% rally over the past three days. So what should investors do?

We’ll get to the technical outlook in a moment, but first, let’s touch on the fundamentals.

Inside Advanced Micro Devices

Why did AMD stock get such a strong bounce in early June? Two reasons really drove it higher. The first, it became known that Advanced Micro Devices’ RX 500 graphic chips can be used to “mine” cryptocurrencies like Bitcoin.

This product launched in April and is still sold out at many online retailers. This has investors optimistic that revenue will be strong and demand will continue once retailers are able to restock. Given Bitcoin’s bubble-like rise, the mania certainly looks set to continue for some time.

Additionally, Apple Inc. (NASDAQ:AAPL) just held an enormous event, its WWDC conference. Aside from big announcements regarding the HomePod speaker, a new iOS and everything here, there was something else for AMD.

Investors are cheering for AMD’s RX Vega GPU. Specifically, that the iMac Pro will use one of two types from the Vega lineup, the Radeon Pro Vega 56 or the Radeon Pro Vega 64. Both are quite powerful and will be the driving computing force in Apple’s new devices.

The effort likely comes on Apple’s part of trying to boost its virtual reality capabilities.

Advanced Micro Devices’ recent additions bode well for its business moving forward. Management is returning the company to profitability in 2017, which is a lot harder than it sounds. Over the past nine months, debt has fallen 37% and its valuation (compared to Nvidia Corporation (NASDAQ:NVDA) and Intel) is attractive.

Trading AMD Stock

AMD stock, AMD, Advanced Micro Devices
Click to Enlarge
Source: Stockcharts.com

So where does that leave AMD stock? I’m a levels-guy first, meaning I look for historic areas of support and resistance. I like to keep it simple.

In Advanced Micro Devices’ case, that level comes into play around $12.25. On Tuesday, AMD made it to $12, but it was unclear if it would climb above it. On Wednesday, AMD stock flew past it, up to $13 at one point.

AMD stock is now above the 50-day moving average too. And even though it gave up the bulk of its gains on Wednesday with that instant pullback from $13, it was a constructive move.

Finally, there’s the relative strength index and the MACD. The RSI (blue circle) tells us if a stock is overbought when the reading is above 70. Fortunately, AMD stock is not in this territory yet. MACD tells us momentum. For AMD, momentum is positive, but appears to be nowhere near running out of gas. Both of these indicators are bullish.

So are there negatives? Yes, a few. Although not pictured, AMD has not gotten above its 100-day moving average. Additionally, the two red stars on the chart mark where AMD stock has struggled, failing to clear $13.

Given the strong volume the past few days, it is more likely the stock trades higher rather than lower. A move below $12 and the 50-day moving average may change that. But like we said a few weeks ago, for now, AMD stock is still running with the bulls.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held no position in any stocks mentioned.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2017/06/advanced-micro-devices-amd-stock-buy/.

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