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Technical Bottom? This Chart Paints A More Bullish Picture For AMD

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Technical Bottom? This Chart Paints A More Bullish Picture For AMD

Advanced Micro Devices, Inc. (NASDAQ: AMD) started off hot out of the gates in 2019, but it still hasn’t made it back within striking distance of its 2018 highs.

AMD's stock has been consolidating for roughly a month now, drifting slightly lower since peaking at around $30 in early April. Technical traders have been watching the stock closely and anticipating a breakout in one direction or the other in the near future.

Consolidation Range

AMD has a long history of extreme volatility, but the stock has been trading in a relatively narrow trading range between $27 and $30 since gapping up to 2019 highs in early April. That gap is now closed, freeing up the stock to potentially bounce to once again challenge the $30 level in the near term.

AMD looks to have plenty of near-term support in the $26 to $26.50 range. The $26 level is the stock’s 50-day simple moving average, which has served as support all year. AMD also bounced at the $26.50 level after posting its lowest opening price in a month on Monday morning.

Even though AMD stock has been consolidating for roughly four weeks now, the stock is still sitting on year-to-date gains of 46.9 percent, giving bulls reason to hope another leg higher is coming.

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Bullish Longer-Term Trend

A look at a longer-term chart paints a much more bullish picture for AMD in the medium term.

AMD has been in a bullish trading channel since December of 2018 when the stock bottomed at around $16. AMD is now trading near the bottom of that longer-term bullish channel, providing yet another reason for traders to look for a near-term bounce.

AMD’s April peak of $29.95 was just the latest in a series of higher highs and higher lows going all the way back to the fourth quarter, the hallmark of a bullish trend. As long as AMD holds this pattern, patient bulls should ultimately be rewarded.

Some time in the next several weeks, AMD will be pushed out of its consolidation channel in one direction or another. The support line of the bullish longer-term channel is converging with the resistance line of the shorter-term trading channel forming a pennant pattern.

The pennant pattern typically results in a bullish breakout to new highs when it occurs within a bullish longer-term trend, such as the case with AMD.

Levels To Watch

In the near term, AMD traders should watch for a continuation of Monday’s bounce off of the open. A breakdown below $26 would potentially take out the 50-day SMA and the bullish support line of the longer-term channel. Below $26, AMD likely wouldn’t find any support until 200-day SMA at $23.35.

If AMD trades higher in the coming days, a breakout above $29 could put the stock back on track to test 2019 highs of $30 in the near term. In the longer term, the stock’s 2018 peak of $34.14 would be the last potential roadblock between AMD and new all-time highs.

At time of publication, AMD's stock traded around $27.48 per share.

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