AMD Is Breaking Out Now - Here’s the Trade

Advanced Micro Devices is breaking out over resistance on Monday. Here's how to trade the stock as the markets head into December.
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Advanced Micro Devices  (AMD) - Get Report was having a solid day on Monday, up about 5.5%. But it's more than that - the shares are now breaking out.

The $88 level has kept a lid on the stock since early August. Pushing through that mark now opens up the stock for an even larger run.

The rally in AMD also comes as Xilinx  (XLNX) - Get Report jumps on the day, up more than 5% to new all-time highs. It’s worth reminding readers that AMD is in the midst of a takeover of Xilinx.

Last but not least, while Nvidia  (NVDA) - Get Report is about flat on the day, shares continue to consolidate after reporting solid earnings. If Nvidia joins in on the rally, it could give an extra boost to AMD stock.

Let’s have a look at the chart of Advanced Micro Devices.

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Trading AMD

Daily chart of AMD stock.

Daily chart of AMD stock.

A quick look at the chart shows a clear breakout on the day. Shares are bursting through $88 resistance, a level that has been in play since early August.

In early September, when the rest of tech was enjoying breakaway momentum, shares of AMD briefly broke above this resistance point. However, it topped out at $94.28 and quickly found itself back below $88.

That allowed AMD to settle into a trading range, bouncing between $75 support and $88 resistance.

While ranges can be frustrating for traders, they are great for investors. Shopify  (SHOP) - Get Report has been going through a similar experience, as it continues to trade quite well in the past few days.

In the case of both AMD and Shopify, these trading ranges allow the stocks to consolidate and digest the recent gains. That’s just healthy price action, there’s no other way to put it.

With AMD stock clearing resistance though, bulls now need to turn their attention to the upside. Specifically, the September high is the next area of focus just over $94, followed by a possible move to $100.

On the downside, given that AMD has powered through $88 with so much momentum, I want to see this level hold as support. Below is not a good look for the bulls.