It would have been easy not to notice, given all the noisy rhetoric surrounding Advanced Micro Devices (NASDAQ:AMD). Nevertheless, it’s happened. AMD stock is being squeezed into a narrowing trading range framed by clear support and resistance. One side of that range will have to snap sooner than later.
In more direct terms, Advanced Micro Devices stock has moved into a scenario that’s going to force traders to make a big commitment to their stance.
The good news is, those boundaries are well defined. The bad news (for the bulls) is that there’s just as much new pressure being put on the floor as there is on the ceiling. One more bad day could too easily send AMD stock into a steep selloff.
No Longer in Turnaround Mode
It’s a well-known but underappreciated story. Largely left for dead by its rivals by that time, AMD named Lisa Su as CEO in late 2014. This turned out to be a stroke of brilliance. Aside from her technical and engineering know-how, she’s proven a capable leader and something of a turnaround artist.
Investors have been well rewarded for their patience and/or willingness too. Look at the AMD stock price rally: from 2016’s low of less than $2 per share to the current price near $30 translates into a 1500% profit.
As that march matured though, its underpinnings changed. At its onset, the “bet” was on the company’s turnaround trajectory. Now, more than three years in and the turnaround largely complete, the stock reflects its maximum plausible value.
In other words, the turnaround is over.
A handful of traders aren’t ready to concede that point yet. Many of that cohort, in fact, will argue — loudly — that the next three years will look much like the past three years have for AMD stock. And anything’s possible to be sure.
Even without doing it intentionally though, the majority of traders have already quietly signaled their uncertainties.
The AMD Stock Chart Says It All
As was noted, it would be easy to overlook. There it is, though. Advanced Micro Devices stock has been unable to push its way back above the purple 50-day moving average line after last month’s weakness. But at least the gray 100-day moving average line appears to be acting as a floor. Either are long-term firsts but seeing them together is something we’ve not yet witnessed.
Critically, the combination of simultaneous support and resistance signals neither bulls nor bears have made a commitment to their opinion. The scenario also signals, however, both groups are going to be forced into making that commitment soon.
And for the record, the bears have a slight edge here. AMD stock has already fallen under the rising support line, plotted as a dashed blue line, that carried shares up from their late-2018 low. The stock also bumped into resistance — repeatedly — just above $34 in the middle of the year before tiring of failure. That ceiling, marked in yellow, may come into play again at a later date.
Still, until and unless the AMD stock price breaks back under the 100-day moving average line at $30.19, none of the bearish undertow matters.
If that floor does snap though, the 200-day moving average line at $26.33 becomes the next best target.
Looking Ahead for Advanced Micro Devices Stock
While AMD stock mostly did its own thing between 2016 and now, it’s increasingly tethered to the broad market’s tide. That is to say, it’s more likely to move with the overall market than defy its undertow.
That adds to the bearish case working against Advanced Micro Devices stock at this time.
Not only is September and early October the most reliably bearish time of year for the market, the third year of a presidential term is typically lethargic through the middle of November, until after midterm elections. This year’s strength so far sets the stage for another modestly meaningfully lull over the next several weeks.
Whatever’s in the cards this time around, there’s certainly not a great bullish case for Advanced Micro Devices stock. At best, it’s a coin toss, and that toss is coming soon.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about him at his website jamesbrumley.com, or follow him on Twitter, at @jbrumley.