While there have been many positives for Advanced Micro Devices Inc (NASDAQ:AMD), the technical chart set up shows AMD stock could decline in the near term.
Shares of Sunnyvale, California-based Advanced Micro Devices Inc (NASDAQ:AMD) seem to be headed lower in the near term, in spite of the emergence of a number of positives lately. AMD's Ryzen line up of CPUs have turned out to be fairly competitive, posing at least a small threat to rival chipmaker Intel (NASDAQ:INTC). The former also recently launched its Vega line up of GPUs, and the initial batches are sold out. These GPUs have also been well received by industry observers, and while there are some who expected more, at large, they haven't disappointed so far. However, AMD shares seem to be caught in near term downtrend, and the technical chart set up suggests that the stock could correct further over the coming days. While we at Amigobulls are firm believers in fundamental analysis based investing, investors could use technical analysis to pick better entry and exit points.
AMD Stock Technical Analysis.
AMD shares have seen a rather unrelenting correction since the company announced its second quarter results in late July. While shares of the chipmaker reacted well initially to the company's strong results, rising to as high as $15.65 per share, they have corrected since. AMD stock is now down by over 21% in less than a month. This correction has also pushed the stock to breach key support levels along the way. AMD stock fell below its 20 day Simple Moving Average (SMA) on the 31st of July, followed by a negative crossover with its 50 day SMA in mid-August. And yesterday, the stock fell below its 100 day SMA as well, for the second time in about a week, after bouncing back briefly.
As it appears, the 100 day SMA is not acting as a support right now. Further, another bearish crossover seems to be on the cards, with the 20 day SMA poised to fall below the 50 day SMA. When a shorter term moving average falls below a longer term moving average, it is a reflection of negative momentum.
Even the odd bullish crossover has failed to stem the fall, reflecting the negative sentiment around the stock. AMD's 50 day SMA made a bullish crossover with its 100 day SMA at the beginning of this month. Generally, when a shorter term SMA rises above a longer term SMA, it is considered to be a bullish signal. However, AMD shares have continued their decline, at large. The Moving Average Convergence Divergence (MACD) has a bearish bias too, and the stock is far from oversold territory.
AMD's Relative Strength Index (RSI), a popular momentum indicator, has a current reading of about 41. A measure of 30 or below is commonly used as a threshold to indicate oversold conditions, and as is evident, AMD seems to have room to fall. The stock is also some distance away from the lower Bollinger Band, another confirmation that the stock isn't oversold as yet. The norm is to consider a stock oversold when the stock price touches the lower Bollinger Band.
The next support for the stock is at its 200 day SMA, at about $11.9 a share. That's about 3.4% away from yesterday's closing price of $12.34 per share. Even if the stock does end in the green today, the next level of resistance will come from the 100 day SMA at $12.68, which is about 2.7% higher than the current level. AMD stock will have to rise above this resistance if it has a resume an uptrend.
AMD Stock Looks Like A Winner In The Medium Term, Though.
From a medium term perspective, though, we think AMD shares have an upside potential. AMD's Ryzen CPUs have started to have an impact on Intel's CPU prices. Meanwhile, the chipmaker has shown good progress in its GPU business, and looks poised to give NVIDIA (NASDAQ:NVDA) something to think about, at the very least. Now, AMD has launched its new software driver, called the Radeon Software Crimson ReLive Edition Beta, aimed at Blockchain computing and cryptocurrency miners. Given the current interest in cryptocurrency mining, the move definitely augurs well for AMD. More so, because AMD's Vega GPUs are already gaining acceptance as "excellent" cryptocurrency miners. All in all, AMD shares look headed higher in the medium term, once the near term pressure recedes.
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