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AMD - Possible Head and Shoulder Top Formation

A head and shoulders top is a trading chart pattern where you can identify a left shoulder, a head and a right shoulder from the top of price action on your chart.

The run up to the left shoulder should be nice and clean with little congestion. Bear in mind that when price returns down through these levels we would like a nice clean trade. If there are lots of congestion areas on the run up then you can expect the same on the way down. Every congestion area is an opportunity for price to reverse. The ideal scenario is lots of nice long bullish candles with little rejection and few bearish bars.

Identifying a Head and Shoulders Top

The left shoulder is the first in the series of three tops. It will form a minor congestion area and be followed by a slight pullback. The pullback low after the left shoulder is the left side armpit.

The head should stand elevated from the left and the right shoulder. This is the second of three tops and the highest of the three. After the head there is a pullback and the low of the pullback forms the right armpit.

The right shoulder is the third top. It should be at about the same (doesn’t have to be exact) level as the left shoulder and below the head. It should look similar to the left shoulder. It should be a congestion area of about the same length and height.

The final stage in identifying a head and shoulders top is to draw the neckline. Draw a straight line between the left and right armpit (the lows in-between the left and right shoulders) and extend the line to the right. This is the neckline.

Symmetry is the key in identifying head and shoulders tops.

Trading a Head and Shoulders top

The trade from a head and shoulders top is triggered by price dropping below:

The neckline. If the neckline is nearly horizontal then this works best.
If the neckline is sloping up or down then the trade is triggered by price dropping below the low of the right armpit.

Pullbacks occur regularly after entry on Head and Shoulders tops. The pullback should stop at or before price retraces to the neckline.

Watch out for support underneath your entry. Even if there was no resistance on the way up price can still react to previous support and resistance levels on the way down. Factor the risk of this in before taking your trade.
Profit target

Major support below the pattern should be your realistic target price. Technically you could calculate the likely target by working out the difference between the price at the top of the head and the level of the neckline at the same time that price peaked.

Learn about head & shoulders chart patterns in detail including examples of how to trade them and profit from them using a positive traders equation on our trading training course.

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Above text used with permission...

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Citing resources and release available upon request :)

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So the plan is...

We probably gap up, and run above $43. We are close to $43 in the after hours market right now, up from $42.83 I think. Just from memory here. Tired. So we should run but stop at $43.25 then we reverse. $43.40 or whatever the high of the day was the profit target. I noticed this after we reversed from there:

NYSE
NYSEAM
NASD

All on the bid and ask at the same time in the top 3 spots. This was controlled selling possibly, I watched it for like 30 minutes as they moved it slowly from $43 to $42.90 to $43.80, then a little dip to $42.75 real quick and back up. They moved it back to $43 in afterhours with ADP or whatever (1 shares futures market moving scam artists).

All the quants are thinking another flag bullflag, this is bullcrap. I think this is it folks. We have X-mas, New Years, January selling (if you make 50% and sell half in the last week of Dec and half the first week in January you get 2019 and 2020 at 25% and you can go golf for 7 months and wait for a market bottom.

If we don't break out and run tomorrow, I think Delta Neutral is the play for us.

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So right Armpit would be $39.05. Hard stop.

Then we would run back to $41.75 probably $42 for the right shoulder. Then after earnings, back to $35.5 which is exactly where we should have gone to last earnings.

The China Trade Farce I think has created this Head and Shoulders Pattern.

Now you can make a killing here if you trade it right. The final leg down to $35.75 is where you sell everything buy it all, and wait for the run back to $50.

Let us see. Just a Trade Idea for you.

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We obviously don't have a neckline yet, but we will. Even if the top is $46 or $44, we are most definitely forming a head and shoulder pattern here. It means every single definition. Especially the multi-year high one, and the eurphoria that comes with it. Conditions are perfect, just like 2001, 2006.

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This time is it different. The fundamentals of the company and such will allow this pattern to make you lot of money. The stock isn't going to break down anytime soon, and people are waiting to buy this stock. The formation of this pattern though, coupled with holidays, and institutional January selling in the first we (we are all over it - programmed already), will keep buyers on the sidelines as they wait for the right armpit, or other key resistance levels.

Happy Days.

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We are and always will be bullish on AMD. NVDA and INTC don't have any idea what is coming from AMD. But as someone once said, "Respect the technicals".

I think BofA of MS or some other big whatever was out earlier today with underweight on semis for clients now.

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SO...

I think we bounce around the head for the next week or whatever until January. Then institutions start selling, and we get the right armpit. Then we get the right shoulder as the retail investor sees the "buying opportunity" and we bear market it down below the neckline. Lets see how this plays out live.

Later.

Trade active

UPDATE: So they have gapped it up to $43.15 on 69K shares. The action into the open, and after open should tell us what is next. Stay tuned :)

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Lets see what happens when the average retail investor has access to sell some AMD at 7:30EST.

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7:24EST NOw

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A question you have to ask you self today, if you want to determine investor sentiment around the world on AMD. Very easy to do. Don't need neural networks, algorithms, sentiment engines, rules engines, and one of the largest data centers in the world, which I have access to right now....

Would you, the average investor, not the day trader in you, or swing trader in you, but the average investor in you... the institutions represent the average investor as well... or are supposed to... would you, on December 20, 2019, Friday, right before X-mas, 11 days until 2020, AMD up (PLACE NUMBER HERE for percentage) in 9 weeks, sitting up in the sky at $43.12 / $43.14, would you put NEW MONEY to work right now? Would you even put $500 into AMD today at $43.15 and then just sit back, relax, come back in January, which only 5 TRADING DAYS AWAY, and see where it is? Or do you already OWN AMD or are thinking about it? and maybe waiting those 5 days and come back in January, and maybe a pullback and then I buy my AMD $500? This is all you need to know about investor sentiment today. If this baby, and I would love it to, pushes right through $44 and heads to $46 today? Why would that be? What sentiment today would do that? That is the question you need to ask when you trade AMD today.

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And if it does happen, as Cramer has said so many times, you need to know why a stock is moving? Momentum begets momentum?

Trade active

Dec 2019 6:56 AM Price target on AMD raised... it me get the rest...

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Analyst raised price target today on AMD

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AMD price target raised to $51.50 from $39.00 at Wedbush Wedbush analyst Matt Bryson raised his price target on AMD (AMD) shares to $51.50 from $39.00 as he is increasingly confident in his 2021 estimates given that AMD continues to execute and Intel (INTC) continues to struggle. As evidence of the former point, Bryson points to review sites' "ubiquitously positive" take on Threadripper's launch last month, and to support the latter the analyst notes conversations with Intel customers and contemporaries since November that "have drawn a picture of Intel's shortages worsening." Bryson keeps an Outperform rating on AMD shares.

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$51.50 PRICE TARGET, Wedbush

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Would suggest for the bold trader out there, taking a stab at swing trading this on the Wedbush upgrade. if it breaks out for a $46 run...

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We would suggest the $43.35 level for the breakout. You can buy in the pre-market, and see how it handles that level and either exit you position or add to it. That is our plan.

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INSTITUTIONAL STANCE ON AMD

We are all heading to Turks and Caicos next week, so we are 100% delta neutral on AMD. Where AMD is sitting when we get back to it, whether next week or the first week in January, we won't be up or down. We are completely collared. We own lots of shares, that we accumulated in the $28 to $36 zone, and we are not planning on selling any until January 1st. We have algorithms that control our short calls, and puts on AMD, and other products, and they are adjusted in real time so that if AMD moves, we don't love, and protect 100% of our profits.

We are a little put heavy today though, so if we do go down on lighter volume over the holidays, we will actually make money.

Have a great day.

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RELATED EARNINGS

1. NVDA – Feb 13
2. AMD – Jan 28
3. MU – Dec 18
4. XLNX – Jan 22
5. TSM – 16 Jan *** NEXT
6. INTC – 23 Jan
7. AMAT – 13 Feb
8. AVGO – Mar 12
9. LRCX – 22 Jan
10. KLAC – 28 Jan
11. MRVL – 05 Mar
12. ON – 31 Jan
13. QCOM – 29 Jan
14. STM – 23 Jan
15. TXN – 22 Jan

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Take your pick. Any of these could signal a top in SEMIs.

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You know, the thing after 30 years in the business that I don't struggle with anymore, and is the hardest for most traders... EXIT STRATEGY.

Make sure you have one, before you buy anything...

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There are also institutional buys and sells at the close and open for the past week...

5 MIllion shares. Something fishy.

Trade closed: target reached

Done for the day. If this break $44.25 convincingly, or breaks $43.70 convincingly, back, otherwise, have a good weekend.

$44.25 Might be the top of the head. Who knows. Wait and see...

drchelsea1

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drchelsea1