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To a significant extent, the success Advanced Micro Devices, Inc. (NASDAQ:AMD) has enjoyed this year has been due to the “gold rush” of Bitcoin miners. Graphics Processing Units (GPUs) have been in high demand while the price of cryptocurrencies has been rising. However, the tide is shifting on two shores.
First, China’s regulatory entity has determined that new Initial Coin Offerings (ICOs) are illegal and recent ICOs should be refunded. This won’t likely lead to Bitcoin crashing again, but it does change the outlook for future gains in alternative cryptocurrencies, which will reduce demand for “mining equipment.” The other issue is that miners are shifting more towards ASIC processors over GPUs, which will likely be an even bigger problem for AMD in the near term.
We think AMD is at a technical pivot point where downside potential is far more likely than upside. Rising risks in the broader indexes and a change in the underlying fundamentals of the Bitcoin market should send the stock back towards its May lows.
‘Buy to open’ the AMD October 13 Puts (AMD171020P00013000) for a maximum price of $1.10.
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InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.
Most recently, John and Wade are co-options strategists of Turbo Trader Live — a live, interactive trading room service that runs two hours every trading day the market is open. Turbo Trader Live focuses on long call and put options, as well as long and short vertical spread strategies. Find out how to get in on the live trading action and start making real profits by clicking here.
