AMD Stock May Look Weak, but There’s Still Lots of Opportunity

Relative weakness in AMD has been quickly challenged by a potentially powerful new catalyst

In a market that’s demonstrated a knack for volatile price swings in 2020, is this week’s dizzying tribute in Advanced Micro Devices (NASDAQ:AMD) an opportunity for investors to buy, sell or simply hold on tight too? Let’s take a look at what’s happening off and on the price chart of AMD stock to form a stronger risk-adjusted opinion on positioning for tomorrow and beyond.

It’s been a great run in Advanced Micro Devices. Demonstrated relative strength and technical leadership the past few years, and during this year’s bear market on the back of the semiconductor outfit’s consistently strong and innovative product execution, market share capture, and top-notch leadership from CEO Lisa Su has allowed for phenomenal returns for many investors.

But AMD has lost some of its appeal with investors the past month. Evidence of this change in character is clearly visible on the AMD price chart.

Since late April competitor shares of AMD have formed lower highs. It’s a bearish divergence from its peers. Intel (NASDAQ:INTC) , the world’s largest semiconductor, the Vaneck Vectors Semiconductor ETF (NASDAQ:SMH) and tech-heavy NASDAQ have all continued to trend higher. Meanwhile, AMD rival Nvidia (NASDAQ:NVDA) has jumped to new all-time-highs.

So, what gives? Other than AMD showing obvious relative weakness, it’s hard to say. The good news and following Wednesday’s stiff intraday losses, investors now have a price chart to take a more confident cue from regarding decisions to buy, sell or hold-off on in Advanced Micro Devices’ shares.

AMD Stock Daily Price Chart

Broad stroke, individual stocks are typically sympathetic to the broader market’s current trend.

That’s particularly true for a larger capitalization name like AMD that’s a constituent in multiple indices including both the NASDAQ and S&P 500. Still, the market is made up of stocks and not the other way around.

In no uncertain terms institutional buying or selling, company-specific news, analyst coverage, profit-taking or any number of catalysts, known and unknown, can impact how a stock behaves regardless of the broader averages.

This includes a stock’s price chart. And right now Advanced Micro’s weakness of late has turned into a lower risk, higher reward advantage for investors wanting to own shares at a discount.

Technically, Wednesday’s volatile and bullish U-turn in the NASDAQ was sufficient to send AMD shares into a key test of pattern, price and Fibonacci support. At its intraday low the stock put together a double bottom relative to its May 1st low. The pattern loosely challenged a pair of 50% levels tied to this year’s high and low stock price and AMD’s former high from 2000.

Combined with AMD’s stochastics hitting oversold levels and yesterday’s price action also forming a bullish but volatile hammer candlestick, the prospects for going long shares looks good.

Further, with AMD’s monthly stochastics signaling a bullish ‘momentum style’ crossover in overbought territory and the same weekly indicator trending nicely inside the indicator’s neutral boundaries, there’s a lot of evidence working in favor of higher prices to come.

All the same, all bets are off the table if shares fall below $51. In our estimation, that’s enough leeway both off and on the price chart to give AMD. A defensive approach after the post-Covid-19 rally and years of out-performance is simply prudent.

As for buying AMD shares, my advice for investors is to buy shares on a move above $53.81. That’s 1% above the high of the daily chart’s hammer. Importantly, I’d suggest waiting for the daily stochastics to firm up, i.e. flatten and align with the stock’s supportive longer-term indicators.

These demands may result in a slightly higher purchase. The flip side though and as today’s out-the-gate pattern buyers are finding out, sometimes paying up is the less costly move in the scheme of things.

Disclosure: Investment accounts under Christopher Tyler’s management owns positions in Advanced Micro Devices (AMD) its derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.