Advanced Micro Devices, Inc. (NASDAQ:AMD) has been on an unbelievable rally over the last 14 months, soaring more than 700% from its January 2016 low to a decade high this February. AMD stock consolidated those gains from there, and has been on quite the rollercoaster ride over the last month.
Advanced Micro Devices shares initially got hit on earnings. The fiscal first-quarter numbers were basically in line with expectations — first-quarter adjusted losses came to 4 cents per share on sales of $984 million — but forecasts for gross margins weren’t as positive as many had been looking for. The shares gapped 24% lower as a result and hit a low right around the 200-day moving average (the red line).
AMD stock attempted to rally following buzz of a licensing deal with Intel Corporation (NASDAQ:INTC), climbing as high as the 50-day moving average (the blue line) before once again falling as those rumors were put to rest.
The stock is now approaching its post-earnings low near the 200-day moving average, which is a level it has held above for more than a year. The action suggests that Advanced Micro will retest support in the coming weeks.
There are two ways to view this:
An aggressive investor could see a pullback to the 200-day moving average as a short-term buying opportunity as long as it doesn’t come on heavy volume. However, any close below the indicator would be a sell signal. Both the chart and my gut are telling me that AMD stock is likely to breach the moving average at some point, which would lead to a larger downtrend.
Advanced Micro Devices’ one saving grace would be the announcement of some sort of deal with Intel — or something comparable. That’s a long shot, though, which is why I view AMD as nothing more than a short-term trading vehicle. Its valuation remains extremely high, and at this point in time, I do not believe it warrants a double-digit price.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt is currently in the midst of an exciting launch centered around his trademark three-prong investing approach that targets the mega-trends old Wall Street is missing out on. His next-gen investing strategy is delivering enormous profits in stocks and ETFs. Click here for more information on his latest venture.