AMD Could Rally 30% From Here

Here's how traders can play the chip stock.

Advanced Micro Devices (AMD) has weakened since late November. The shares were trading around $160 and subsequently fell to near $70 in early July -- a rude awakening for buy-and-hold investors. The stock has begun to improve so let's inspect the charts and indicators.

In this daily bar chart of AMD, below, we can see that the shares are making a rally and it is easy to suggest that this advance could fail like others before it. But a good market observer needs to be alert to changes in volume and other clues to know when a shift is underway. Prices have closed above the declining 50-day moving average line.

The daily On-Balance-Volume (OBV) line has turned up strongly in July telling us that buyers of AMD are now more aggressive. The Moving Average Convergence Divergence (MACD) oscillator has turned upwards at a higher low than in early May for a bullish divergence. AMD is now close to crossing above the zero line for an outright buy signal.

 

In the weekly Japanese candlestick chart of AMD, below, we can see some subtle improvement. Prices are turning upwards but remain below the declining 40-week moving average line.

 

The weekly OBV line is showing improvement. The MACD oscillator made a long decline but is now close to a cover shorts buy signal.

 

 

In this daily Point and Figure chart of AMD, below, we can see a potential upside price target in the $119 area.

 

 

In this second Point and Figure chart of AMD, below, we used weekly price data. Here the software suggests a price objective in the $128 area.

 

 

Bottom-line strategy: Traders could probe the long side of AMD on a dip to around $89 risking to $79. The $120 area is our price target.

 

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