AMD Stock Technical Analysis: Setting the Stage for Its Next Move

amd stock technical analysis
Credits: istock.com/Peshkova

AMD Stock: Continues to Exhibit Bullish Tendencies

I do not think I have ever experienced a stock market rally like the one currently in development. This market is clearly geared towards higher stock prices, and the order of the day continues to be new all-time highs.

With this type of bullish backdrop, how anybody can be bearish on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is beyond me. I am certainly not. I have expressed on numerous occasions that my price objective stands at $24.50. This objective was obtained using a method called a “parabolic extension,” and it is within the body of knowledge known as technical analysis, which I employ to analyze the prospects of an investment.

For those who have not read any of my past work, technical analysis is a method of investment analysis that is based on the notion that historical price and volume data can be used to forecast what the future may bring. I use this method of analysis to create investment strategies because when it is applied appropriately, the results are simply outstanding.

The current bullish environment for stocks has created a rising tide, and like the saying goes, “a rising tide lifts all boats.” This obviously does not apply for every investment in the universe, but as long as Advanced Micro Devices stock is trading above its 200-day moving average, this logic applies to it.

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The following Advanced Micro Devices stock chart illustrates the 200-day moving average.

Chart courtesy of StockCharts.com

This AMD stock chart has been annotated to highlight the very influential 200-day moving average. This indicator is simply created by averaging the closing price over the last 200 days and plotting that value on the stock chart.

The 200-day moving average separates bullish investments from bearish ones, so in essence, it acts like a dividing line. If an investment is trading above the 200-day moving average, it implies that the investment in question is healthy and bullish. One trading below it is considered unhealthy and bearish. The 200-day moving average is a popular indicator among traders, and its popularity may have something to do with why it works so well.

This moving average has been very influential when it comes to AMD. In March 2016, Advanced Micro Devices stock decisively broke above the 200-day moving average and it has remained above it ever since.

It is very common for the 200-day moving average to act as a level of price resistance or price support. In May of this year, AMD stock began testing this influential moving average from above, and it has managed to keep a foothold above it. This feat is magnified given the number of times this moving average has been tested since August. I count seven tests of this moving average, and for each time it was tested, buyers were eager to step in and support this metric.

The number of times this moving average has been tested is a testament to its significance. I have no issues stating that as long as the stock is trading above the 200-day moving average, a bull market is still in development.

In fact, the price action on the Advanced Micro Devices stock chart is quite constructive, indicating that the stock is setting up to make a move.

Chart courtesy of StockCharts.com

This AMD stock chart has been annotated in order to highlight the constructive price action. Constructive price action consists of an alternating wave structure of impulse waves and consolidation waves.

The impulse waves capture the stage in a bullish trend where the stock price makes an advancement towards higher stock prices. The consolidation waves capture the stage in a bullish trend where overbought conditions are alleviated in order to create the necessary environment so a new impulse wave can develop.

These waves balance each other out and, in alternating wave structure, they create the necessary dynamic where a bullish trend can sustain itself and flourish.

AMD stock is currently within the confines of a consolidation wave, and a sustained close above $15.75 would indicate that the consolidation wave is complete and a new impulse wave is in development. This would obviously imply that higher stock prices are on the horizon, putting my price objective of $24.50 in its crosshairs.

Analyst Take: 

Advanced Micro Devices stock continues to find support on its 200-day moving average, and as long as it remains above it, I will continue to hold a bullish view on this investment. Remaining above this metric increases the odds that the stock is setting the stage to make another advance towards higher stock prices.