Advanced Micro Devices (NASDAQ:AMD) closed out 2019 as one of the top performers of the S&P 500 index. The 155% gain on the year made it one of the most talked-about momentum stocks on the Street. With earnings coming around the corner, it’s worth taking a fresh look at the chart of AMD stock to chronicle its epic ascent and spot the trends and levels that matter most moving forward.
Today’s path will follow our usual top-down approach, beginning with the weekly time frame before drilling down into the daily and hourly time frames.
Advanced Micro Devices Stock Charts
Short of one weekly candle where AMD closed flat for the session, the semiconductor stock has rallied for 15 straight weeks. And these weren’t narrow-bodied candles, mind you. They were big, wide-bodied bars full of momentum. Along the way, AMD stock price grew by 82% in a little over three months. There’s no doubt much of the company’s future growth is being priced in right now. The million-dollar question is whether traders’ exuberance has gotten ahead of itself.
Oscillators across the board are flashing overbought signals, but with the positive feedback loop fueling this rise, it’s anyone’s guess as to when the gas runs out. In situations like this, I prefer to let the chart tell me the top is in versus guessing which uptick will be the last of the swing. Besides, top picking is a game won only by liars and lucky ducks. And the latter’s luck always runs out.
Daily Time Frame
The daily view boasts all the characteristics that you would expect for a stock perched at a record high after a relentless rise. Its moving averages are pointing higher on every time frame. Momentum is slowing a touch, but it’s to be expected after such a large run. Even superhero names like AMD stock need to rest on occasion. The past six days of consolidation is a welcome development, allowing overbought pressures to ease and the 20-day moving averages to play catch-up.
If we had a bunch of distribution days crop up in the volume indicator, then I’d be concerned. But we haven’t seen anything of the sort. So far, the selling pressure has been kept in check. Ideally, we’ll see further digestion before the next up-leg kicks off. That will provide a more compelling breakout pattern when resistance is finally breached. I’d rather wait for a break above $50 or a dip toward $45 before deploying a new trade.
For a more detailed view of the past week’s range, check out the 15-minute chart. I peg resistance just above $50 and support near $47. Two things would give me pause about a bullish trade at this juncture. First, yesterday’s rally took out a short-term ceiling, only to see the stock plunge back below it. That’s a failed breakout and could weigh on the stock in the short run. Second, we’re fiddling in the middle of the range, which doesn’t exactly lend itself to a clear entry point.
Source: The thinkorswim® platform from TD Ameritrade
The intraday chart reaffirms my thoughts on waiting for a break above $50 or retreat toward $45 before entering new plays. Once we do get a cleaner setup, I continue to favor strategies like naked puts. The payouts are juicy due to the elevated volatility.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!