Stock analysis

AMD Stock Could Break Out or Break Down

Advanced Micro Devices, Inc. (AMD) stock has been trading between its 50-day and 200-day moving averages since the beginning of August. With these averages moving closer together, the stock could see a near-term breakout or breakdown from its current levels. The company has seen a lot of early success with the launch of its Ryzen processor, but supply issues and growing competition from NVIDIA Corporation (NVDA​) have kept AMD shares at bay.

Investors have been closely following the launch of the budget-friendly Ryzen processor, which has lived up to the hype at an unbeatable price point. At about half the cost of the closest Intel Corporation (INTC) competitor, the Ryzen processor represents an impressive comeback following the lackluster FX brand and its Bulldozer and Vishera processors. Advanced Micro Devices has also seen early success for its EPYC server MPU among hyperscale players, according to Jefferies analysts. (See also: AMD’s Herd of Bullish Investors Grows Only Bigger.)

From a technical standpoint, the stock rebounded from lower trendline resistance at around $12.00 to its 50-day moving average at $13.14 earlier this week. The relative strength index (RSI) appears neutral at 50.65, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal upside ahead. The long-term trend remains bullish, but the short-term trend has been mildly bearish.

Traders should watch for a breakout from the 50-day moving average to retest prior reaction highs at around $15.00 or a breakdown from the 200-day moving average and the trendline at around $12.00 to test reaction lows at around $10.00. A bearish crossover of the 50-day moving average below the 200-day moving average could signal the beginning of a long-term downtrend over the coming quarters if a breakout fails to materialize. (For more, see: AMD’s Technicals Suggest Stock Could Rise to $18.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.