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Buy the Dip in AMD? Let's Look at the Charts

AMD is working on its sixth straight decline as sellers struggle to break it down. Is it a buy? Let's have a look.

Shares of Advanced Micro Devices  (AMD) - Get Advanced Micro Devices, Inc. Report have been giving traders a series of fits and starts.

One day the stock looks like it’s set to break out, and the next it’s teetering on support as investors wonder if it’s coming back down.

While AMD has been a big winner this year it has struggled since breaking out in late November. 

The move thrust shares to new all-time highs as its takeover of Xilinx  (XLNX) - Get Xilinx, Inc. Report hangs in the balance.

While both AMD and its most-often-compared-to peer Nvidia  (NVDA) - Get NVIDIA Corporation Report have easily outperformed the VanEck Semiconductor ETF  (SMH) - Get VanEck Semiconductor ETF Report this year, both stocks trail the ETF over the past three months.

Given the leadership role these two usually play, investors may find the underperformance interesting. Let’s look at the charts.

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Trading AMD

Daily chart of AMD stock.

Daily chart of AMD stock.

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In late November, AMD burst through resistance near $87.50. The stock climbed more than 6% that day and closed near the highs.

From there though, the stock struggled with its prior all-time high at $94.28, ultimately needing to reset before pushing through that area last week.

However - and this is where my “starts and fits” reference comes into play from the beginning of the article - AMD stock struggled with $97.50 for four straight sessions last week before tipping lower on Monday.

Surprisingly, the stock is working on its sixth straight decline. Even more surprising, I find that to be somewhat constructive and perhaps even a bit bullish.

While the stock lost and has failed to reclaim its 10-day moving average, it continues to hammer off the 21-day moving average this week. Of course, Wednesday’s action could put that observation to bed, but so far, the sellers haven’t gained much momentum despite a number of consecutive daily losses.

Currently we have an inside day in AMD. Bulls may consider a long position should the stock rotate over the day’s high and reclaim the 10-day moving average. 

That would put the $97.50 area on the table, followed by the more obvious $100 mark.

On a close below Tuesday’s low of $90.53, AMD stock may retest the breakout point near $87, as well as the 50-day moving average. So long as the overall market is in relatively decent shape, that could be a solid dip-buying opportunity in AMD.

The bottom line? Let’s look for some upside rotation after a six-day skid. Otherwise, a deeper dip may be in play for AMD.