Advanced Micro Devices Inc (AMD) - Get Report reported earnings after the close on Tuesday and despite reporting a revenue miss and offering expectations below consensus, the stock popped 10% from its session close of $19.25 to the after-hours high of $21.34. Wednesday's early high of $22.40 extended the breakout to 16%.
The stock closed Wednesday up 19.95% to $23.09.
The semiconductor company cited an excess inventory of graphics chips, which would normally drive the stock down big time. This risk was already priced-in as AMD was already down 43.8% from its 2018 high of $34.14 set on Sept. 13. More important is the bull market gain of 20.1% since setting its Dec. 24 low of $16.03. This gain is now close to 40%.
Investors were comforted by the company's full-year 2019 outlook that included upbeat comments on their next-generation of semiconductor components for PCs, data centers and servers.
The Daily Chart for AMD
Courtesy of MetaStock Xenith
The daily chart for AMD shows that the stock has been close to a "death cross" formation that now seems less likely as the stock has been rising along its 200-day simple moving average higher since Oct. 29 with the average now at $19.51. Note that when the stock traded as low as $16.03 on Dec. 26, it closed that day above the Dec. 24 high. This is called a "key reversal" favoring higher prices. The 2018 close at $18.46 was the input to my proprietary analytics and resulted in the three horizontal lines shown on the chart. The stock was staged between my semiannual and quarterly pivot at $18.76 and $20.42, respectively, pre-earnings which is my buy zone. The upside is my monthly risky level at $29.82.
The Weekly Chart for AMD
Courtesy of MetaStock Xenith
The weekly chart for AMD will be positive if the stock ends this week above its five-week modified moving average of $20.65. The stock remains well above its 200-week simple moving average or "reversion to the mean" at $9.96. The 12x3x3 weekly slow stochastic reading is projected to rise to 49.80 this week up from 38.98 on Jan. 25.
Trading Strategy: Given these charts and analysis, investors should buy weakness to my quarterly and semiannual value levels at $20.43 and $18.76, respectively, and reduce holdings on strength to my monthly risky level at $29.82.
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Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.