Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is showing signs of recovery. Is the latest uptick a dead cat bounce or a fresh bull run?
The only thing that has been predictable about shares of semiconductor company Advanced Micro Devices, Inc. (NASDAQ:AMD) in 2017 has been their unpredictability. AMD stock has not warmed up to the recent encouraging news coming in and has struggled for the major part. However, over the last two trading sessions, shares of the Sunnyvale, California based chipmaker have bounced back. This brings us to the dilemma which has, of late, become very common with AMD stock: Is the latest uptick a dead cat bounce or a fresh bull run? Can AMD stock rise further?
More positives coming in for AMD.
It has long been a general opinion that the cryptocurrency tailwind could be a temporary one for the Dr. Lisa Su led company. The banning of cryptocurrency by the Chinese government was believed, by many, to be another step in that direction. However, RBC analyst Mitch Steeves, who is a NVIDIA (NASDAQ:NVDA) bull, has a totally different take. He opines that the latest ban will only drive up the mining of bitcoin and other cryptocurrencies. In a note to his clients, he writes that according to his estimates "Nvidia's crypto-related sales could be $120 million this quarter, about 80% of what Nvidia made last quarter." Steeves though concedes that "AMD is still the best chip for cryptocurrency mining from a price to performance ratio". The above statements also mean that things also look encouraging for AMD on the cryptocurrency front and it could ride this tailwind to a strong Q3 earnings performance. AMD’s CFO, Devinder Kumar's recent commentary at the Deutsche Bank technology conference also re-emphasizes the fact that the cryptocurrency tailwind is here to stay.
AMD is making inroads into NVIDIA's territory. NVIDIA completely dominates the deep learning, artificial intelligence and cloud computing space. On account of its lead in AI, NVDA stock also got a massive price target hike recently. However, given NVIDIA's prior close association with Baidu (NASDAQ:BIDU), AMD's collaboration with the Chinese search giant on optimizing software for AMD Radeon Instinct GPUs in Baidu datacenters is being considered as a massive positive for the Dr. Lisa Su led company in this space. Further, the adoption of AMD GPUs by Amazon's AWS for its new Appstream 2.0 Graphic Design instances is another encouraging news. Though AMD has a long way to go before it can match Nvidia’s Tesla GPUs on deep learning and other services, all these developments hint at a good long-term potential for the chipmaker.
In another piece of news, the leaked AMD Ryzen mobile APU benchmarks are very promising. They are expected to be up to 90% faster than the previous generation Bristol Ridge APUs. Though some very reassuring news for investors, actual results need to be awaited to make a better judgment. It is still to be seen how Mr. Market reacts to all these developments. Going by the late recovery of AMD stock, all this could propel the stock higher in the near-term.
Technicals provide some insight on how to play AMD stock from here.
Investors would be apprehensive that the recent positive developments could be again overlooked by the market. However, the technicals provide some valuable insights to how to approach the stock from here. A few days back, the AMD stock technical chart was flush with sell signals but the technical setup for AMD stock has improved a bit since then. AMD stock has made multiple bullish breakouts above key moving averages in the last trading session. AMD shares made a bullish crossover with the 20-day, 100-day and the 200-day SMAs. However, investors should be a little cautious here as the crossovers were not backed by strong volumes. As has been the case recently, the stock price has tracked back below these trend lines in the next few sessions after making bullish breakouts. Hence, it would be better for investors to wait till a session or two to see if the bounce above the key SMA's holds before buying into the stock. AMD stock faces its next resistance level at its 50-day SMA which presently stands at $13.07.
To conclude, AMD stock has not been able to shake off the recent sluggishness. However, with the technical charts flashing bullish signals, AMD stock could be set for a bounce higher. With the more positive news flow coming through, AMD stock could have found the trigger to rise higher from here. Yet investors are advised to be cautious given the volatile nature of the stock and follow the charts closely before making a move.
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