The American multinational semiconductor company that develops computer processors and related technologies for business and consumer markets, Advanced Micro Devices, Inc. (NASDAQ: AMD) seems to be gearing up for a surge as per its latest charts.
#1 Ascending triangle pattern Breakout: AMD’s daily chart shows that the stock had broken out of an Ascending Triangle pattern. An Ascending Triangle pattern is a bullish pattern. This is marked on the chart in purple color. The breakout level of the ascending triangle pattern generally acts as a good support level.
#2 Trading Above MA: The stock is currently trading above its 50-day as well as its 200-day SMA, which implies that the bulls are currently in control.
#4 MACD Above Signal Line: In the daily chart, the MACD line (light blue color) is currently above the MACD signal line (orange color). This is typically considered a bullish signal.
#5 Bullish ADX and DI: The ADX line has currently started to move up from below –DI and +DI lines.
The +DI line is also currently above –DI line. This indicates possible bullishness.
#6 Unbroken Uptrend: The weekly chart shows that the stock’s uptrend is unbroken, as it has been forming higher highs and higher lows. This indicates possible bullishness. The uptrend line has been shown in pink color.
#7 %K above %D: The weekly chart also shows that the %K line is currently above the %D line, indicating possible bullishness.
#8 Bullish MACD: In the weekly chart as well, the MACD line (blue color) is currently above the MACD signal line (orange color), indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level is if the stock corrects back to the breakout level of the ascending triangle pattern at around $57.00.
Alternatively, you may also purchase the shares of AMD if it trades above yesterday’s high, at around $62.00.
TP: Our target prices are $68 and $75 based on the breakout from the Ascending Triangle pattern.
SL: To limit risk, place a stop loss near $51.30 (for entry near $57.00) and $55.50 (for entry near $62.00). Note that this stop loss is on a closing basis.
Our target potential upside is 16% to 32% in the next 3-6 months.
- Entry at $57.00: For a risk of $5.70, the target rewards are $11.00 and $18.00. This is a nearly 1:2 and 1:3 risk-reward trade.
- Entry at $62.00: For a risk of $6.50, the target reward (TP#2) is $10.00. This is a nearly 1:2 risk-reward trade.
In other words, this trade offers nearly 2x to 3x more potential upside than downside.
Risks to Consider
The stock may reverse its overall trend if it breaks down with high volume from the ascending triangle breakout level. The sell-off of the stock could also be triggered in case of any negative news, overall weakness in the market, or any regulatory changes in its sector.
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