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This morning, I am recommending a bullish trade on Advanced Micro Devices, Inc. (NASDAQ:AMD), the global semiconductor company.
My indicators are giving neutral readings this week, a slight downgrade from last week’s bullish readings.
After staging a massive 23% jump since the lows on Christmas Eve, the S&P 500 is now within less than 2% of its all-time high. I am expecting the index to test its highs again in the coming weeks or months, but I don’t think it will be able to break through that level on the first try.
If that key resistance level holds, I would expect to see a pullback followed by a longer period of consolidation before the market has a real chance at breaking out. But I am still in the bullish camp. April has been an up-month for the past 13 years in a row, and I’ve seen a positive development on the S&P 500 and the Nasdaq.
The “Golden Cross”
For readers who haven’t heard of this before, a “golden cross” occurs when a shorter-term moving average crosses above a longer-term moving average. The most common moving averages traders look at when analyzing charts are the 50-day and 200-day moving averages. The golden cross on the S&P 500 is circled in blue in the chart below, and it has also appeared on the tech-heavy Nasdaq.
Daily Chart of S&P 500 Index (SPX) — Chart Source: TradingView
While those moving averages are commonly used, golden crosses don’t happen too often. In fact, the last times a golden cross formed were in 2016, 2015, 2012, 2011 and 2009. Nearly all of these instances have preceded strong, long-term, bullish runs in the market.
It has also been a good indicator of short-term performance as well. Since 1980, the market has risen over the following month about 75% of the time after a golden cross forms.
The Nasdaq is full of technology stocks that could benefit from this bullish technical indicator, and one area in particular has caught my eye…
Semiconductors Have Turned Around
Last year the trade dispute between the U.S. and China had put pressure on the semiconductor industry, but stocks like AMD have turned around. If we turn to the chart below, we can see there AMD has been in a steady upward channel since December’s lows last year.
Daily Chart of Advanced Micro Devices, Inc. (AMD) — Chart Source: TradingView
Part of the boom in semiconductor stocks is due to increased optimism surrounding the U.S.-China trade deal. I still have my doubts about that situation, but if the market is pricing that optimism in to AMD’s price, we can collect a profit while it rises.
The golden cross on the Nasdaq is also a good sign that the tech sector will continue to head higher. Since both the technical and fundamental picture look good, I am recommending a bullish call option on AMD.
Buy to open the Advanced Micro Devices, Inc. (AMD) July 19th $32 Calls (AMD190719C00032000) at $1.80 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.
