I’ve been keeping a close eye on Advanced Micro Devices, Inc. (NASDAQ:AMD) over the last couple of months, and that has a lot to do with one of my primary strategies.
Those of you who have followed my advice in the past know that I like to use a top-down approach to finding investment opportunities in the market. This allows me to focus on broader industry trends, then dig down deeper to identify specific groups and stocks that are outperforming their peers in the current environment. This strategy treated my subscribers and me well over the years, and it’s one reason I’m keeping watch over AMD stock.
We talked about this stock back in February. Advanced Micro Devices was up more than 600% over the past year and had just powered through $15 for the first time since 2007. I wasn’t a buyer there — in fact, I had said to expect a near-term top.
But I did note that it could provide a technical swing-trade opportunity if it pulled back, bounced off $12.60 and traded in the $13 area.
Given the recent chart action, I believe we’re seeing that now.
AMD Stock Chart
AMD hit a multiyear high of $15.55 on Feb. 28 before dipping more than 20% to test support at its 50-day moving average (the blue line). Support held, and while the shares fell to a low of $12.38 on March 6, they were able to rebound to close the day at $13.04.
That was the technical signal I was waiting for, and with Advanced Micro Devices only slightly higher today, I now view it as a buy given the potential for the market, sector and stock to hit new yearly highs in the coming weeks.
The tech industry is outperforming right now, and I remain bullish on it looking out into the second half of 2017. One of my favorite groups within the sector is semiconductors, and that’s what brings me to individual stocks like AMD, which continues to be a fan favorite.
While the fundamentals remain an issue here (AMD stock is overvalued), I do expect money to pour into semiconductors as a whole, and Advanced Micro in particular in the near-term. Momentum is behind the stock, and the chart remains bullish, so I believe buying near the 50-day MA provides a high reward-to-risk opportunity.
For those of you who like to implement a strict risk management strategy, I’d recommend a tight 2% stop-loss below the 50-day moving average. This will help keep any potential losses to a minimum.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.