AMD Stock: Momentum Has Swung into Bullish Alignment
Betting on anything other than higher equity prices has been an unprofitable venture as the major market indices continue their ascent into the record books, forging new all-time highs.
I am focusing on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock because the bullish backdrop created by the general market is contributing to my beliefs that the stock is primed for higher prices. Just to clarify, I have been bullish on Advanced Micro Devices stock since August 2016, and I outlined the basis of my bullish beliefs in a publication titled “AMD Stock: This Tech Stock Is About to Go Vertical.”
Just to clarify for those who have not frequented my works in the past, my bullish inclination toward higher AMD stock prices was generated using technical analysis. This method of investment analysis is based on the notion that historical data points like price and volume can be used to speculate on what destiny is in store for an investment.
This stock has been caught in a trading range for a little over a year, and this range is illustrated on the following Advanced Micro Devices stock chart.
Chart courtesy of StockCharts.com
This stock chart illustrates that, since January 2017, AMD stock has been caught in a trading range bound by resistance at $15.50 and support at $9.75.
The resolution of this trading range will determine whether Advanced Micro Devices stock is set to appreciate or depreciate. I have the inclination to believe that this pattern will resolve itself in a bullish manner by breaking above $15.50 because the moving average convergence/divergence (MACD) indicator has just swung into bullish alignment.
MACD is a momentum indicator that is used to distinguish whether bullish or bearish momentum is influencing the price action in a stock.
A bullish MACD cross implies that bullish momentum is influencing the price action and creating a path of least resistance toward higher prices, while a bearish MACD cross implies that bearish momentum is influencing the price action and creating a path of least resistance toward lower prices.
The bullish MACD cross that was just generated implies that higher AMD stock prices are likely, and it is why I have the inclination to believe that this trading range will resolve itself by breaking above resistance.
Such a development would extend the bullish trend that began in February 2016, and the fact that this trend remains constructive reinforces my beliefs that a bull market is still in development.
This constructive bullish trend is highlighted on the following stock chart.
Chart courtesy of StockCharts.com
This AMD stock illustrates the bullish trend that began in February 2016. This bullish trend contains the quintessential characteristic that defines all bullish trends, which is a sequence containing higher highs and higher lows.
This sequence has been constructive in nature, which suggests that this move toward higher prices can continue.
Constructive price action consists of two predominant waves: an impulse wave and a consolidation wave.
The wave highlighted in green is the impulse wave, and these kinds of waves are advancing in nature. These waves capture the stage in a bullish trend when the stock price makes a sustained move toward higher prices, which creates the higher highs.
The wave highlighted in purple is the consolidation wave, and these types of waves are corrective in nature. These waves capture the stage in a bullish trend when a stock price corrects, and they create higher lows.
Consolidation waves are very important because they unwind overbought conditions, restoring the health to a bullish trend and setting the stage for an advancing impulse wave to follow.
Impulse waves and consolidation waves feed off each other. As long as they continue to alternate, the trend toward higher prices can continue, and higher stock prices will prevail.
When Advanced Micro Devices stock breaks above $15.50, it will suggest that the trading range, which doubles as a consolidation wave, is complete and that a new advancing impulse wave toward higher prices is in development.
I am watching the trading range that is currently in development on the Advanced Micro Devices stock chart. When the price breaks above resistance at $15.50, higher AMD stock prices will prevail. I have the inclination that such an event is on the horizon because an influential momentum indicator is suggesting that higher prices are currently the path of least resistance.