Semiconductor stocks have been on fire lately, and Advanced Micro Devices (AMD) has helped to lead the charge.
Up 169% over the past 12 months, the stock is easily outpacing peers like Nvidia (NVDA) and Intel (INTC). The most recent earnings report from Micron (MU) which continues to hit new 52-week highs - also was helping to fuel the group’s rally.
Earlier this month, Advanced Micro Devices again traded to new highs, but was struggling with the $43 level. On Friday, it burst through resistance and on Monday AMD continued even higher, climbing to a new high of $45.60.
It’s got investors (and analysts) wondering if $50 isn’t as far off as many had previously thought. While shares are getting a bit extended, it’s not out of the realm of possibility.
Let’s look at the charts.
Trading Advanced Micro Devices
As you can see on the daily chart, AMD continued to put in a series of higher lows as uptrend support (blue line) squeezed the stock price against a static level of resistance at $43.
Known as an ascending triangle, these setups are viewed as bullish as investors look for an eventual breakout over resistance. In the case of AMD, that’s exactly what has played out.
Where to now? In terms of resistance, there’s little standing in the way to prevent a run up to $50 at this point. Much like Tesla’s (TSLA) march up to $420, the only thing that can slow the bulls at this point is a lack of buyers.
AMD does have a Fibonacci extension up at $49.79, but a slight overshoot of that mark could get the stock to $50.
While some may argue that the stock has an elevated relative strength reading (blue circle) - and to be clear, it does - that overbought condition can persist for longer than expected.
Just look at last month for an example. AMD’s RSI hit 75, just as it is now, when shares were trading for less than $37 in early November. The RSI reading dipped slightly as shares consolidated, but then erupted higher before eventually topping out at $41.79. AMD shares were in an elevated RSI state for several weeks before cooling off.
So while the RSI can be helpful, it’s not something to base an entire thesis around. Whether AMD gets to $50 doesn’t really matter though, because it will almost surely need to pull back.
If and when it does, see where support comes into play. The most obvious spot to watch now is the rising 20-day moving average, as well as prior resistance at $43.
