As fastidious as high-end micro devices (AMD) – Request report may be for traders, the larger picture pattern is quite obvious.
Investors keep that in mind as AMD heads to its earnings report, which should be expected after the market closes on Tuesday.
TheStreet is blogging live on AMD’s fourth quarter earnings after today’s close. Then check out our Homepage then for more details.
AMD and Nvidia (NVDA) – Request report have stolen the show when it comes to chip makers, especially at Intel (INTC) – Request report less than great performance from the past year.
So what’s AMD’s bigger picture pattern? It’s easy. Stocks tend to consolidate for months on end, rise sharply and then consolidate or correct again.
The stock has been trading well lately, up four sessions. It helps that it has received some bullish coverage for the gains. But the bulls will start looking for more profit after the printout.
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Trading AMD Stocks
Daily chart of AMD stocks.
Chart courtesy of TrendSpider.com
Even with the major drop in March, look at the way AMD hit back into the $ 50 and chopped sideways. Once the stock broke out and hit the previous high, it took only nine sessions to rally more than 38%.
Eighty-one sessions later and AMD stock was still flat after more than three months of consolidation. Over the course of three days, the stock then rose 10.5% to new highs.
Now 10.5% is not the 38.5% tear we saw earlier, but the stock tends to repeat this pattern. Just look at the chart above.
Last week we saw an excellent reversal of previous resistance (marked by the blue arrow). That was a very bullish price action, as previous resistance had turned support.
In the days that followed, the AMD stock pulled back the 10-day moving average and VWAP measure of the big break in December.
It is now rolling just below the 261.8% extension and USD 98 resistance.
Ideally, we would see a breakout above these numbers with AMD above $ 100. In that scenario, it would put $ 108 in play, the 161.8% extension from the November low to the September high.
If the stock has a bearish reaction to gains, look for USD 87 and the 100-day moving average for support. Under these markings, a high-risk situation for AMD could arise in the short term.