Advanced Micro Devices (AMD) has had an incredible year, gaining 74% year-to-date. Is this stock a buy right now, or should investors stay away?
For decades, AMD has been battling Intel (INTC) for dominance in the chip market. Over that time, no matter what innovations AMD produced, Intel always seemed to gain the upper hand.
That changed this year as the fortunes of these two companies, and the share prices of their respective stocks, headed in opposite directions. Particularly over the past month, AMD, in blue, has outperformed Intel, in green by a wide margin.
AMD has had an amazing run, but the stock has pulled back in recent days. Traders who are interested in buying AMD right now might want to use the following technique:
I've placed the 10 day (green), 20 day (blue), and 50 day (red) moving averages on AMD's chart. Instead of entering the position all at once, consider buying one-third of a normal sized position at each moving average.
If all three entry points are hit, traders should have an average cost of around $70. If all three entries are not hit, that means the price has stopped falling, and possibly even turned higher.
Notice how the stock has been selling off on light volume (shaded yellow). This tells us that financial institutions aren't dumping shares indiscriminately.
Wall Street firms rarely enter a position all at once. Individual investors will never have the buying power of a financial institution, However, they do have the freedom to learn and use some of Wall Street's tactics.
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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.