AMD Stock: Flying High
In my last publication on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock, I outlined a bullish pattern developing on the price chart that could really get Advanced Micro Devices stock moving. It did not take long for that feat to be accomplished, as AMD stock has taken flight and is soaring the skies. I
In my previous report on Advanced Micro Devices, the stock was trading at $7.80. Now, as I write this report, it is trading at $10.36. That is a 32.8% return in only 16 trading days. That is quite an impressive flight.
The reasoning behind my bullish outlook on AMD stock was based on a bullish price pattern that was setting up on the price chart. I even had the audacity to suggest a potential price target of $11.84, and it was the AMD stock chart that suggested that such an outcome was a possibility.
I use technical analysis as the basis of my investment research, and this body of knowledge is heavily reliant on price and volume. These factors can be used to discern trends and project future prices.
It was technical analysis that first suggested that a bull market was evolving in AMD stock, and also suggested that the price was going to accelerate.
The birth of the bull market in Advanced Micro Devices stock began in December 2015, and the following chart illustrates where it began.
Chart courtesy of StockCharts.com
The birth of the bull market in Advanced Micro Devices stock began in December 2015, when a golden cross was generated. A golden cross is a signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon and, as a result, it creates a bullish tailwind that increases the probability that a bullish pattern will succeed.
This indicator is not without its flaws. Shortly after the bullish signal was generated, a sell-off ensued and AMD stock was trading below the levels at which the golden cross was generated. In the months ahead, the golden cross was in danger of averting as the moving averages began to converge. AMD stock acted appropriately as the price quickly rose, and the bullish signal remained engaged.
The inability to avert the bullish signal was an indicator to traders that there was inherent strength in AMD stock, and an impulse wave quickly developed.
The Advanced Micro Devices stock chart below illustrates the constructive developments that followed.
Chart courtesy of StockCharts.com
The AMD stock chart listed above illustrates what a healthy bull market trend should look like. An impulse wave takes the price to new heights and the consolidation wave that follows serves to alleviate the 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. 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 which wave was set to proceed. 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, AMD has the propensity to create a bullish impulse wave and, when a bearish cross is engaged, AMD stock has the propensity to create a consolidation wave.
The MACD indicator, coupled with the price target suggested by the price pattern, indicates that AMD stock still has further room to run.
Bottom Line on AMD Stock
I am bullish on Advanced Micro Devices stock because the price chart suggests that such a view is warranted. I believe AMD still has room to run, and I will continue to be bullish until the price chart suggests otherwise.