AMD Short - Support Turned Resistance
Updated
The AMD chart has a few key things that caught my attention and I figured was worth sharing. Charting a fibonacci retracement from our absolute peak in September 2018, and the subsequent October 30th and December 26th lows, we can see some key levels for AMD stock. We can clearly see that AMD has strong support in the $16-17 price range, with the two reversals which were staged then. Both of those recoveries met strong resistance at the $20 level, which happens to be the 78.6% mark off of the $34 high AMD saw.
Since then we have seen AMD break the $20 resistance and move up to tap $25 on January 31st. Previously $25 seemed to provide support for the stock, when AMD fell off of its September highs it stopped at that price level, a 50% retracement, and then it continued upwards meeting resistance at the 38.2% line (~$27). We can now see that 50% retracement point as resistance to AMD's momentum after a 2nd rejection that just occurred in the past two days.
There are several factors at play encouraging my short position on the stock for this short time period. Long term I can see myself turning bullish on AMD with a good trade deal and some strong signals that economic growth isn't stagnant. Short term, and I mean immediate short term, I don't expect it to impact the next week or two. It could lead to a bump, which could be magnified in semis given their production relationships with that region, but I would go so far as to argue that the market expects a deal to be made at this point with the recent rally and also considering that the White House's announcements regarding trade this week have all been very positive. Since Trump has already announced delaying the tariffs that catalyst should be absorbed by now, he noted that they will "probably" meet later next month. I don't see many other bullish catalysts for this stock following the rejection off that new resistance point, I say this because they have already revealed product lines, they don't report earnings for a bit, some more recent large partnerships are already announced and I am thinking trade may have a muted upside for the near-term.
I do, however, see more bearish catalysts for this very narrow period. While a more dovish fed came across with Powell's speech, the underlying message was not positive. Yes, the market doesn't like the Fed raising rates, but it is concerning that the Fed doesn't feel like economic growth is strong enough to continue on the path or raising rates to more "normal" territory (hard to say what normal is there anymore). If the market ends up responding more poorly to this, then I think it is fair to say we'd see AMD get dragged down with the broad market. Not to mention that from a more macro perspective we've already busted our nut with the TCJA and corporate tax rate cuts. As I've already noted that I don't think we will see another trade deal announcement this week or next lends to little upside there, but if we see issues with a trade deal at any point in the near future that would definitely be quite an interesting catalyst (I don't think this is likely, still fun to ponder though).
Back to the more technical side. With $25 looking like new resistance, declining volume and a lack of near term bullish catalysts, I expect AMD to make it's next move downwards to at least a $23 support point. If AMD cannot hold $23 then I would expect it to continue down to where the moving averages are converging (~$21 level). Based on this assessment I will be taking the following positions: AMD Puts $25 Strike Expiring 3/1, AMD Puts $24.5 Strike Expiring 3/8, AMD Puts $22 Strike Expiring 3/16.
I am not your financial advisor, you are responsible for your own trading activity.
Happy trading!
Since then we have seen AMD break the $20 resistance and move up to tap $25 on January 31st. Previously $25 seemed to provide support for the stock, when AMD fell off of its September highs it stopped at that price level, a 50% retracement, and then it continued upwards meeting resistance at the 38.2% line (~$27). We can now see that 50% retracement point as resistance to AMD's momentum after a 2nd rejection that just occurred in the past two days.
There are several factors at play encouraging my short position on the stock for this short time period. Long term I can see myself turning bullish on AMD with a good trade deal and some strong signals that economic growth isn't stagnant. Short term, and I mean immediate short term, I don't expect it to impact the next week or two. It could lead to a bump, which could be magnified in semis given their production relationships with that region, but I would go so far as to argue that the market expects a deal to be made at this point with the recent rally and also considering that the White House's announcements regarding trade this week have all been very positive. Since Trump has already announced delaying the tariffs that catalyst should be absorbed by now, he noted that they will "probably" meet later next month. I don't see many other bullish catalysts for this stock following the rejection off that new resistance point, I say this because they have already revealed product lines, they don't report earnings for a bit, some more recent large partnerships are already announced and I am thinking trade may have a muted upside for the near-term.
I do, however, see more bearish catalysts for this very narrow period. While a more dovish fed came across with Powell's speech, the underlying message was not positive. Yes, the market doesn't like the Fed raising rates, but it is concerning that the Fed doesn't feel like economic growth is strong enough to continue on the path or raising rates to more "normal" territory (hard to say what normal is there anymore). If the market ends up responding more poorly to this, then I think it is fair to say we'd see AMD get dragged down with the broad market. Not to mention that from a more macro perspective we've already busted our nut with the TCJA and corporate tax rate cuts. As I've already noted that I don't think we will see another trade deal announcement this week or next lends to little upside there, but if we see issues with a trade deal at any point in the near future that would definitely be quite an interesting catalyst (I don't think this is likely, still fun to ponder though).
Back to the more technical side. With $25 looking like new resistance, declining volume and a lack of near term bullish catalysts, I expect AMD to make it's next move downwards to at least a $23 support point. If AMD cannot hold $23 then I would expect it to continue down to where the moving averages are converging (~$21 level). Based on this assessment I will be taking the following positions: AMD Puts $25 Strike Expiring 3/1, AMD Puts $24.5 Strike Expiring 3/8, AMD Puts $22 Strike Expiring 3/16.
I am not your financial advisor, you are responsible for your own trading activity.
Happy trading!
Trade active
Still more room to trade this short, AMD quickly gave up its support level. Looking for AMD to get support around the 20 dollar level before next earnings. Positive earnings could give it a nice boost from there.
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