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How to Trade AMD After Earnings - What the Charts Say Now

AMD stock has been trading sideways for a while. Will the earnings report cause a breakout? Let's look at the charts.

As finicky as Advanced Micro Devices  (AMD) - Get Advanced Micro Devices Inc. Report can be for traders, the bigger picture pattern is pretty clear.

Investors are keeping that in mind as AMD heads into its earnings report, due after the market close on Tuesday.

TheStreet is live blogging AMD's fourth-quarter earnings after the close today. Please check our home page then for more details.

AMD and Nvidia  (NVDA) - Get NVIDIA Corporation Report have stolen the show when it comes to the chipmakers, particularly with Intel’s  (INTC) - Get Intel Corporation Report less-than-stellar performance over the past year.

So what is the bigger picture pattern from AMD? It’s simple. The shares tend to consolidate for months at a time, move sharply higher, then consolidate or correct once again.

The stock has been trading well lately, up for four sessions. It helps that it’s received some bullish pre-earnings coverage. But the bulls will be looking for more gains after the print.

Nvidia and Advanced Micro Devices are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells NVDA or AMD? Learn more now.

Trading AMD Stock

Daily chart of AMD stock.

Daily chart of AMD stock.

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Even with the big pullback in March, look at the way AMD snapped back up into the $50s and chopped sideways. Once the stock broke out and cleared the prior high, it took the stock just nine sessions to rally more than 38%.

Eighty-one sessions later and AMD stock was still flat, after more than three months of consolidation. Then over the course of three days, the stock rallied 10.5% to new highs.

Now 10.5% isn’t the 38.5% rip we saw before that, but the stock has a tendency to repeat this pattern. Just look at the chart above.

Last week, we saw an excellent reversal off prior resistance, (highlighted by the blue arrow). That was very bullish price action, as prior resistance had become support.

In the days following, AMD stock reclaimed the 10-day moving average and the VWAP measure from its high-volume breakout in December.

It’s now coiling just below the 261.8% extension and $98 resistance.

Ideally, we would see a breakout out over these marks, with AMD thrusting above $100. In that scenario, it would put $108 in play, the 161.8% extension from the November low to the September high.

If the stock has a bearish reaction to earnings, look for $87 and the 100-day moving average to act as support. Below these marks could be a risk-off situation for AMD in the short term.