Momentum lovers are salivating over Advanced Micro Devices, Inc. (NASDAQ:AMD) shares today. The high-octane chip company is soaring 5.6% amid heavy accumulation. Resistance levels are melting in the face of AMD’s fiery flight and if its luck holds this could be the start of a new uptrend.
My search for a news catalyst came up empty handed so it appears today’s rally is nothing more than a chance meeting of buyers the world over. From a volatility perspective, AMD shares were becoming quite compressed. Such periods are often the calm before the storm. But in this case we’re talking a good, profit-laced storm.
The classic example is to view the recent price action in AMD as a coiled spring. All the pent-up energy needs is a whiff of buying to breach resistance and then, watch out above!
Click to Enlarge
Resistance in this instance came in the form of the 50-day moving average which, short of one failed breakout attempt last month, has kept a lid on AMD for a spell.
Time will tell if today’s breakout can go the distance but there’s no denying the wind is at buyers’ backs right now.
In sizing up potential targets, the next two resistance levels worth watching are $14.25 and then $15.25.
Buy AMD Stock Calls
The cheap price tag of Advanced Micro Devices obviously makes a straight stock purchase a viable choice. But if you’re looking to reduce the cost even further, consider buying the Nov 13 calls for $1.25. The risk, as with all option purchases, is limited to the initial trade cost. The $1.25 will be lost if AMD sits below $13 at expiration. To minimize the damage, I suggest exiting the trade if AMD breaks support at $12.45.
Consider taking profits if the stock lifts to the $14.25 resistance level. And keep in mind an earnings announcement is scheduled for Oct. 26 so be sure to exit beforehand if you’re not willing to roll the dice into the event.
As of this writing, Tyler Craig didn’t hold any positions in any of the aforementioned securities. 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.
