The stock market has undergone a massacre over the past few weeks, and I don’t say that lightly. We’ve had one of the most aggressive bear markets in history, as the global economy has ground to a halt.
Although Advanced Micro Devices’ business will certainly be hurt, investors continue to see the long-term catalysts in play for the Santa Clara, Calif., chipmaker.
That’s indicated by the stock’s price action, which continues to hold up over major support and is trying to hammer out a low. Let’s take a closer look at the stock.
Trading AMD Stock
First, it’s worth noting that AMD stock fell 38% from its highs in February. That came about one month ago, showing just how stunning this decline has been.
Since hitting those lows of $36.75 earlier this month, though, we’ve seen a quick bounce. The shares are up about 13% from that point.
That’s not the good news, though, as many stocks are up from the week’s lows, too.
Instead, two bullish developments are emerging with AMD. First, its 200-day moving average is holding as support. The stock tested this mark on both Wednesday and Thursday, with the shares bouncing on each test.
Second, Advanced Micro Devices has been forming a falling wedge. While that doesn’t sound good - and to an extent, it isn’t, as the shares have been declining - traders look for these setups to resolve in the form of upside breakouts.
Currently, we’re seeing AMD trying to push through resistance and break out higher.
This move coincides with an improving MACD reading, which measures momentum, and comes as key support continues to hold.
Should the breakout hold, AMD stock likely has room to rally up to its 100-day moving average, near $44.50. Above that and the 50-day moving average near $48.50 is possible.
If the breakout doesn’t come to fruition and markets again flush lower, Advanced Micro Devices may head lower. In that event, look for this week’s low ($36.75) and the 200-day moving average to again act as support.
Below puts the fourth-quarter breakout near $34 on the table.