Tesla Inc’s (NASDAQ:TSLA) partnership with Advanced Micro Devices, Inc. (NASDAQ:AMD) to build an A.I. chip has set Wall Street ablaze, and AMD stock is flying high. The news broke just before the closing bell Wednesday, causing AMD stock to rip 4.7% higher into the close.
While I’m not a fan of chasing stocks due to random news flow, I am certainly an advocate of such behavior when said report generates a quality breakout trade. And that was most definitely the case with AMD yesterday.
For months now, Advanced Micro Devices has been trading in a volatile trading range. The meandering has gone on for so long that the 200-day moving average, which once sat well below the price, has caught up.
That means it’s high time for buyers to dispense with the dithering and kick-start a new advance. Whether AMD’s partnership with Tesla continues to propel AMD stock remains to be seen, but it certainly delivered a buyable breakout play.
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Prior to the breakout, AMD stock was basing beneath its 50-day moving average. Buyers had twice tried to break above this level, but to no avail. That makes Wednesday’s surge all the more significant.
It marked a decisively bullish change in character for AMD shares, which suggests that Advanced Micro Devices stock may finally return to its recent highs near $15.50.
Let’s not forget the contribution seen by volume this week. Accumulation accompanied the last four trading sessions, with some serious aggression on display by the bulls.
Buy AMD Stock Calls
Though implied volatility popped on Wednesday’s news, it remains near the lower end of its one-year range.
That means option premiums are still relatively cheap. If you think this rally can go the distance, then buy the Nov $13 calls for $1.65. The risk is limited to your initial investment and will be forfeited if the stock sits below $13 at expiration.
The reward is unlimited, but consider ringing the register if AMD rises to resistance at $15.50.
As of this writing, Tyler Craig held bullish positions in TSLA. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
