Trading ideas based on technical analysis can be divided into two main categories – trend following or reversal. Most of the pieces we’ve done over the past year within CNBC Pro have tended to follow the following strategies – we’ve counted a lot of bullish pattern breaks, and in the bull market we’ve had so far in 2024, those had a big chance. of success. However, even the best performing stocks are volatile. If that happens, we don’t recommend trying to catch a falling knife. Declines are often more severe and occur faster than previous advances. In other words, there is no reason to guess when the pressure will rise – if it does. However, when a bearish stock washes out and/or falls to a support confluence, the risk-return ratio can turn positive. And if that happens, we can look at a fallback strategy. AMD satisfies those criteria now. First, let’s review what happened to the stock. AMD has had a very challenging time since its highest and worst turn almost nine months ago on March 8. The biggest drop in the stock until August 5 is up to -46%. And while AMD is now out of that August low, it failed to get the kind of follow-up it showed from November’23 to March’24. However, along the way, AMD has experienced two major rebounds, reaching +32% and +44%. And with the stock’s recent hold above the 130 area over the past few weeks, we may be preparing for another rally attempt. The previous two declines were bad enough to produce oversold figures on the 14-day (sub-30) RSI in April and August. Recently, the indicator remained above the 30-threshold, which indicates that the momentum was not negative this time. That is a powerful sign of building. If this bounce continues, the initial target will be near $170. The last two bounces failed to make it to the top, so AMD will have more work to do from then on. If/when it reaches that upside target, the next step will be to see the stock form a traditional bullish pattern, which has been missing since around 2024. If you zoom out, it is clear that AMD has also respected the long-term trend lines (AMD support) in the last few weeks, the two lines have now converged near the 130 point. That’s the support combination we mentioned above. So far, AMD has respected that position and will now be trying to raise the stake even higher. The green horizontal support line is the same line that the stock rose to in December’23 and more recently, again, in August and September’24. Finally, we know that NVDA has dominated the semiconductor space for the past two years, but AMD has matched NVDA’s profit from October 2023 low to high in March – both stocks were up about 145% during that time. The bottom line is that we’ve seen a lot of positive momentum in AMD before, and once traders think it’s really ready to run, the money-following trend could return to the stock again. DISCLAIMER: (Owned by Nvidia) All opinions expressed by CNBC Pro contributors are their own opinions and do not necessarily reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been distributed by them on television, radio, the Internet. or another way. CONTAINED ABOVE IS OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A DECISION TO BUY A SECURITY OR OTHER FINANCIAL PROPERTY. THE CONTENT IS GENERAL IN NATURE AND DOES NOT RECOGNIZE ANY DIFFERENT PERSONAL CONDITIONS. THE ABOVE CONTENT MAY NOT BE SUITABLE FOR CERTAIN SITUATIONS. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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