Thursday's Market Minute: Is AMD's AI-Driven Upswing Slowing?

Advanced Micro Devices AMD has enjoyed a nearly 42% jump since its last earnings event in May as of yesterday’s close, running along with the surging broader semiconductor market as AI continues to captivate the minds of investors. The chipmaker received two price target boosts this morning after hosting its Data Center & AI Technology Premiere event; Goldman Sachs raised its price target to $137 from $97 and kept its buy rating, while HSBC raised its target to $120 from $77 and maintained its hold rating. The Goldman Sachs note said they were encouraged by customer endorsements, and they continue to model share gains for AMD primarily at the expense of Intel (INTC).

However, there are some bearish technical developments for traders to look out for. First, the stock formed a large bearish engulfing candle on Tuesday, which was also the same day it reached its new yearly intraday highs. This candle pattern consists of a red candle whose real body (the distance from the open to the close) completely encompasses the real body of the previous day’s green candle, and potentially suggests a stall in the uptrend. 

Second, keep a close eye on momentum indicators like the Relative Strength Index (RSI), which is showing some mild bearish divergence. This means price is making new closing highs, but the RSI is trending downward and also failing to break above its overbought area at the 80 mark. This is not exactly what bulls would want to see, so be on the lookout for some consolidation or even a pullback if momentum doesn’t improve.

The question that is likely on the minds of many traders now is where this stock could find some resistance if the run up continues. The yearly Standard Deviation Channel study, which can provide potential support and resistance areas to watch based on standard deviations from a Linear Regression Line, shows price closed above the +2 channel yesterday. This is a relatively extreme level based on the stock’s own price history, so look for potential support at the +2 channel, which comes in around 126 based on yesterday’s close. Meanwhile, resistance could be found at the +3 channel near 142.

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