Advanced Micro Devices has been quietly trading in a tight range, and the bulls are looking for a move to the upside.
We’ve seen Nvidia take off and reach highs, and investors are looking down the line to see which stock may be next.
Given that these two chipmakers have similar business lines and solid growth forecasts for 2020, a look at AMD as perhaps the next Nvidia makes some sense.
Investors often have short memories. Remember, this stock doubled from the October low to the February high. So for Advanced Micro Devices to recover its March losses in only a month and then consolidate in a sideways pattern isn’t exactly bearish.
There’s the potential, of course, that support gives way and AMD moves lower. But right now we have to favor the most recent trend, which was higher. Let’s look more closely at the chart.
Trading AMD Stock
On the daily chart above, one can see the massive move from the fourth-quarter low to the first-quarter high that we referenced earlier. After recovering from the March lows, AMD stock continues to trade in a narrowing range.
More recently, look at how tight the trading range has gotten, ping-ponging between $54 on the downside and $56 on the upside.
The shares continue to hold up over the 20-day and 50-day moving averages, as well as uptrend support (blue line). For now, the bias leans bullish, although a break of these support levels would change the narrative.
In that case, it would put the $49-to-$50 area in play, with the May double-bottom low at $49.09.
In terms of upside potential, keep an eye on $56.07. This was the high from last week, with a rotation over this mark putting the June high in play at $59.
While a run to $59 would be a solid move for short-term traders, it’s this level that carries the real potential.
The $59 level has stymied each of AMD’s last three rallies; it proves a tough layer of resistance. Perhaps that will prove true again on a further rally. But clearing this mark could open much more upside.
Specifically, look for a move over $60 to trigger a larger rally. It would put the 123.6% and 138.2% extensions in play at $64.58 and $67.87, respectively.