AMD Stock: Target Obtained
Advanced Micro Devices, Inc. (NASDAQ:AMD) stock has reached a price level that is just shy of the target price that was suggested by the technical pattern I outlined in my previous report on AMD stock. AMD stock hit $11.75 and this price is a bit lower than the $11.85 that was suggested by the bullish pattern, but I deem this price as close enough. I would use this opportunity to reduce or exit my position in AMD stock and await a new setup pattern to develop.
This does not mean that I am bearish on AMD stock. This action only means that in order to stay disciplined on my trading strategies, when a potential price objective that was suggested by a price pattern is obtained, I must abide by my rules and exit or reduce my position. In my previous report, I outlined that based on this pattern, AMD stock had room to run. Now that this price objective has been reached, it is imperative that I act accordingly.
All my trading strategies are developed using the price charts and my strategies center around using technical analysis. This style of investment analysis allows me to define my levels of risk, which involve specific entry and exits points. For those not familiar with technical analysis, it is a form of investment analysis that traders use that uses past price and volume data to discern trends and forecast future prices.
It was the following chart that suggested that $11.85 was a potential price objective on AMD stock.
Chart courtesy of StockCharts.com
The AMD stock chart listed above illustrates a perfect example of what a bullish pattern looks like. Bullish patterns consist of an impulse wave that takes price to new heights and then is followed by a consolidation wave that serves to alleviate any overbought conditions that were created and set up the next prevailing impulse wave.
Impulse waves that are separated by a consolidation wave have a tendency to match in length and, as a result, they can be used to project a price objective. The consolidation wave acts like a midpoint, and this is the method I used to derive the $11.85 price target that I mentioned in my previous publication about this stock.
The indicator in the lower panel labeled “MACD” in the above chart has been instrumental in confirming the new impulse wave. Moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish momentum signals.
When a bullish cross is engaged, bullish price patterns have a higher probability of success because bullish momentum is supporting the price advance.
The MACD indicator, coupled with the bullish price pattern, suggested that the price objective could be obtained on November 17, when I first outlined that a bullish scenario was setting up and AMD stock was trading at $7.67. Now that the price objective has nearly been obtained, it is only wise to act accordingly, a 49% profit in only five weeks is nothing to balk at.
Bottom Line on AMD Stock
I am still bullish on Advanced Micro Devices stock, because the price chart suggests that such a view is warranted, but my target level has been reached and it has happened in short order. As a result, it is wise to always to abide by disciplined trading rules and act accordingly. Perhaps another bullish pattern will emerge that will signal another opportunity to participate in AMD stock.