There’s one level that AMD stock bulls need to clear and one level that they need to defend.
Shares of Advanced Micro Devices (AMD) – Get Advanced Micro Devices Inc. Report are off to the races on Wednesday, up about 4% after the chipmaking giant reported earnings.
On the one hand, it’s good to see a stock rallying on negative news — the latter of which may be the takeaway from some investors after AMD’s quarterly results.
The company reported a slight earnings miss and essentially in-line revenue results, while guiding for fourth-quarter revenue that largely missed analysts’ expectations.
Further, we have the Fed’s rate-hike announcement later today. And more important, we’ve seen this price action from AMD and Nvidia (NVDA) – Get NVIDIA Corporation Report before.
A few months ago, Nvidia updated investors with its preliminary results, which were disappointing. Then the company reported mostly in-line results (because the results were largely known at that point) and gave disappointing guidance.
While Nvidia initially rallied on the results, the stock ultimately went on to make new lows on the year.
Although this scenario could be different — at some point, the bad news is priced in, while the Fed could give us a bullish reaction — AMD bulls may want to be cautious of Wednesday’s rally.
Remember, it also provided disappointing preliminary results last month.
Trading AMD Stock on Earnings
Daily chart of AMD stock.
Chart courtesy of TrendSpider.com
Despite some caution on my end, there are positives.
First, AMD stock has reclaimed the major breakout area near $59 to $60. Further, it’s back above the 10-day and 21-day moving averages.
If the bulls really want to take control of AMD stock, they can start by reclaiming $64. That is roughly the high after the company announced disappointing preliminary results on Oct. 7.
Wednesday’s high? $63.93. So clearly this level is relevant.
If AMD stock can clear $64, it opens the door to the gap-fill at $67.66, followed by a test of the declining 50-day moving average.
On the downside, the bulls have one job, which is to keep AMD stock above $59.
If it loses this level, it means AMD will trade below the 10-day and 21-day moving averages, the 50% retracement of the current rally and the major breakout level from 2020.
Below that puts the recent low near $55 back in play. And yes, it really is as simple as that.
The bottom line: Watch $64. Above is constructive, while below suggests some caution. On the downside, $59 must hold for the bulls to retain some semblance of control.
