AMD Stock Holds Fort, Is Setting Up For A New Rally Now

Advanced Micro Devices, Inc (NASDAQ:AMD) stock is looking to head higher after a month long consolidation.

AMD Stock Holds Fort, Is Setting Up For A New Rally Now
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The bearish sentiment in Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is likely to turn around. AMD has received some good news in the last few days. The demand for its Vega GPUs continues to remain strong. A couple of days ago, AMD had launched the XFX and Sapphire editions of Vega 56 on Newegg and Amazon for $399, but the entire stock was bought out in just 5 minutes. The demand from gamers and the mining community has held up. AMD is also partnering with Baidu to improve its position in China.

AMD stock has disappointed this year.

Shareholders of the chipmaker AMD entered 2017 with lots of optimism. After all, the stock had nearly tripled in the previous year and the stock was still enjoying strong momentum. Wall Street was also bullish, with multiple positive commentaries from analysts pouring in. However, AMD stock has disappointed so far this year. Not only has it not lived up to the expectations, it has also underperformed the broader market. AMD stock has returned 11.7% this year, compared to over 18% return by the Nasdaq Composite and more than 55% return by shares of GPU maker NVIDIA Corporation (NASDAQ:NVDA).
AMD stock chart

AMD stock has strong support at current price level.

After the initial hiccup in early January, AMD stock had rallied to its ten year high. However, the stock lost its momentum after that. AMD stock had tanked over 17% after its Q2 earnings, in spite of beating expectations. AMD reported Q2 non-GAAP EPS of 2 cents a share on total revenue of $1.22 billion, comfortably beating analyst estimates of a 1 cent loss on revenue of $1.157 billion. The downtrend halted after the stock found support from its 200-day moving average in early August.

The 200-day moving average has provided strong support to AMD stock in the last four months. AMD stock had bounced back after testing the 200-day moving average in early May, despite the strong bearish sentiment. AMD stock has again found support from the moving average this month. AMD stock has tested the 200-day SMA multiple times in the last fortnight, but the support has held.

Technicals are turning bullish for AMD stock.

While AMD stock has strong support at current levels, technical indicators are indicating a bullish rally in AMD stock. With yesterday's 4% bounce, AMD stock closed above the resistance from the 20-day and 100-day moving average lines. The 20-day moving average has been acting as a strong resistance level for AMD stock this month. Yesterday's bullish crossovers indicate that AMD stock could go up from the current levels. Complementing the bullish crossovers with moving averages, MACD also made a bullish crossover with the signal line. This indicates a strong momentum for the stock. Further, on the long term daily chart, AMD stock is forming an ascending triangle pattern. An ascending triangle is a bullish continuous pattern. Traders are betting on AMD stock to make major moves in the next couple of months. AMD's November call options were in very high demand during yesterday's trade.

AMD stock technical analysis 31st August 2017

Demand Remains Strong.

While technicals are stacking up in AMD's favor, the news on demand and growth side is also good. AMD's Ryzen CPUs are doing good and are giving competition to Intel. According to Bank of America analyst Vivek Arya, Ryzen chips are occupying 30%-40% shelf space with major retailers, which is much higher than its current market share. To quote him, "Our industry checks show improving mindshare/shelf-space for AMD's new Ryzen desktop-PC processors, incl. 30-50% share at prominent e-tailors, well ahead of AMD's 11% current desktop unit share." The competition from Ryzen chips is eating into Intel's margins.

Vega GPUs are also enjoying a strong demand from gamers as well as crypto-currency miners. Supply of AMD's Vega GPUs is running very tight with most of the retailers. AMD is also making progress on the datacenter front with its EPYC servers. AMD has tied up with Baidu to gain market share in China. China is a $20 billion market which has registered 45% CAGR since 2013. Over all, things are looking better for AMD. After a month of consolidation, AMD stock is looking to head higher.

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Kumar Abhishek Kumar Abhishek   on Amigobulls :

Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice.

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