AMD looking for bottom of a 4th wave correction
Updated
With the the week coming to a close, I think AMD has shown evidence that its looking for the bottom of a 4th wave correction within the 5th wave of a primary move. The price is currently trading at a 2hr support just under the 200ma and seems to be showing some momentum strength relative to when the downward break started. If this support holds I'll be looking at moving into a long stock position with a price target of 170-176. Predicting a bottom is tedious, so I'll just set some conservative stops and re-enter if necessary.
The one thing I'll be looking for on the way up is the formation of a bearish head and shoulders, which could signify more wave 4 downside, or an error/change in wave count (5th wave correction vs 4th wave correction). There are some economic wild cards out there, so any number of drivers could force a wave count change...or I could just be flat out wrong. Though the guys over at Trading Central, and an the algorithmic technical analyzer Recongia both support my thesis.
Trading Central:
"Outlook - Advanced Micro Devices ST: as long as 143.5 is support look for 180.1
143.5 is our pivot point.
Our preference: as long as 143.5 is support look for 180.1.
Alternative scenario: the downside breakout of 143.5 would call for 131.6 and 124.4."
Trading central is basically saying the same thing as me. If the 2hr support holds, expect a movement up to 1.6x times larger than the current correction.
Trading plan:
10 shares
2-3 2 week 155 calls
and of course I'll be looking for some shorter term swings as well as the PA evolves.
The one thing I'll be looking for on the way up is the formation of a bearish head and shoulders, which could signify more wave 4 downside, or an error/change in wave count (5th wave correction vs 4th wave correction). There are some economic wild cards out there, so any number of drivers could force a wave count change...or I could just be flat out wrong. Though the guys over at Trading Central, and an the algorithmic technical analyzer Recongia both support my thesis.
Trading Central:
"Outlook - Advanced Micro Devices ST: as long as 143.5 is support look for 180.1
143.5 is our pivot point.
Our preference: as long as 143.5 is support look for 180.1.
Alternative scenario: the downside breakout of 143.5 would call for 131.6 and 124.4."
Trading central is basically saying the same thing as me. If the 2hr support holds, expect a movement up to 1.6x times larger than the current correction.
Trading plan:
10 shares
2-3 2 week 155 calls
and of course I'll be looking for some shorter term swings as well as the PA evolves.
Note
30m chart breaking down the price action, and the bulk of the evidence I think shows we are nearing the bottom of this correction wave.Note
Here is a 15m showing the rough price action for more upward movement. The final break and support is really the critical part. Note
Here is the head and shoulders top that could signify the larger downside. The 2hr support critical neckline. Losing this support now, or after an upward breakout that does not break the previous high would confirm the HS top, force a closing of all long positions and trigger short positions. Note
If this is in the 3rd stage of a wave A correction, the 5m chart shows that the price action is currently within 1.2x-1.6x the size of the previous downward impulse. The 1.6x range would put the price around 138
Trade active
On Friday I opened an initial share position and hedged with a strangle options strategy. There was more room in the bottom as I thought there could be, but I closed the strangle position for a 300 dollar net profit (including the losses on the share position).
around 3pm today I'll evaluate the the technical and possible DCA into move shares, enter another options strategy, or both.
side note: I realized the losses from the previous trade on Friday as well. I covered my mistake with a short term bullish strap and made back about 50% of the total losses incurred by accidentally closes the short leg and missing the glaring bearish H&S. In total I lost 300.
Note
I'm seeing more evidence of the correction bottom, but it is still neutral at this point.On the 15m you can see the Head and shoulders reversal forming within what I think is the 5 and final wave of the correction.
I'll be looking at this pattern near close to decide if there is a good setup.
Trade active
If the 15m candle closes above the neckline, the long entry will be triggered.bullish strap:
2 146 12/17 calls
1 145 12/17 call
Increase share size to 15.
Trade active
Trade is now active. Just want to point out that I will have pretty tight stops on the long leg for the strap, as this trade could turn south pretty quick. Reverse head and shoulders patterns are an easier way to visualize an Elliot wave impulse. If the main wave A correction is not actually done, this HS pattern could turn into another big impulse down while the A wave finds the bottom.The previous price action is a good example:
Note
alternatively, If the HS and adjusted to more coincide with the MA lines, this could be the tail end of the breakout:Note
Overall given the volume spike, large unfilled gap and RSI room, I feel pretty confident there is more upward momentum. Since the previous channel trend line acted as support on the way down, I expect it to act as resistance on the way up.I'll close the strap at 150 and stop out the long leg if PA fall to 143.
Note
I just went with my gut and stopped out the long leg of the strap. There is a solid bearish HS on the 3m signifying a short-term correction:but more importantly, there is a pretty compelling alternative view of the 15m reverse HS pattern. We could actually be at the top of the head, with the right shoulder still unformed.
This in conjunction with a decent 5m HS playing out:
I think its jus safer to keep the short leg as an initial entry. From here I can pivot to a bearish or bullish play after things have settled a little more.
Note
I copied the wrong link on the previous update. here is the alternative view of the HS reversal:Note
Still watching this head and shoulders formation at the right shoulder, but saw some signs of a reversal. Since the HS top is neutral until neckline breakdown, I took the chance to get a discounted 145, 12/17 call. I didn't want to go into the night with an uncovered put, so grabbing the 145 call puts me what I think is a very good straddle position.From here I can pivot to a bullish or bearish strap tomorrow if a breakout happens in either direction.
Note
I've resisted entering into any AMD options trade under the idea that I would be forcing it instead of waiting for a better setup. I suspected we would see a rejection around the 145 range before a true breakout, and it looks to be shaping up nicely today.The 145 range could be the top of a HS reversal pattern. I'll be setting alerts looking for a support around 141 for a breakout entry with a target range somewhere between 150 and 152
Trade active
AMD looks to be trying to find support at 141 in both the 15m and 30m timeframes, so I opened an initial 12/17 straddle position around the 141 strike. From here I'll convert to a bearish or bullish strap depending on the price break
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