Advanced Micro Capitulation

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The first chart, below, of the monthly timeframe indicates that Advanced Micro Devices has fallen in a straight line since March of this year down to its last line of defense support dating back over twenty years. The heavily-shorted semiconductor has been arguably the worst performing billion dollar-plus market cap stock in a lousy sector this year. Most traders would understandably and reasonably shy away from entertaining a long position in a stock which has been a bottomless pit for at least a few quarters now, complete with major micro issues (not to mention the macro ones that have plagued the semis).

And yet, we can state several things with confidence about AMD:

1) The stock is down to very depressed levels, which likely has priced in everything horrendous except the firm going out of business.

2) The stock came under very heavy selling volume in September and especially October. When you consider that happened after a     multi-month decline, it smacks of capitulation.

3) The stock remains heavily-shorted and, even if it is eventually going out of business, can still feature violent short squeezes rallies higher along the way.

Finally, and perhaps of most substance to traders, the daily chart (second chart, below) for AMD is sporting a clear bullish RSI divergence (top pane below, the RSI is simply a relative strength indicator), as well as a bullish MACD cross (bottom pane), while price had made new lows since late-October.

The key to this type of trade is having a clear exit strategy. You are talking about a badly damaged stock that could easily head lower yet. Hence, a strict stop-loss discipline–Not much below $1.80, if that–is suggested. The upside potential reward is a violent short squeeze that sees the rubber band snapping back in the other direction.

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2 Responses to “Advanced Micro Capitulation”

  1. I wouldn’t want to trade AMD, but this is an investor position to hold. This easily rebounds to $5 and probably will hear of some good news and gets it to $7 per share in .long run. Short run, fire management and lower margins so they at least compete with INTL.

  2. […] A line in the sand for Advanced Micro Devices ($AMD).  (chessNwine) […]

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Previous Posts by chessNwine

Advanced Micro Capitulation

1,066 views

The first chart, below, of the monthly timeframe indicates that Advanced Micro Devices has fallen in a straight line since March of this year down to its last line of defense support dating back over twenty years. The heavily-shorted semiconductor has been arguably the worst performing billion dollar-plus market cap stock in a lousy sector this year. Most traders would understandably and reasonably shy away from entertaining a long position in a stock which has been a bottomless pit for at least a few quarters now, complete with major micro issues (not to mention the macro ones that have plagued the semis).

And yet, we can state several things with confidence about AMD:

1) The stock is down to very depressed levels, which likely has priced in everything horrendous except the firm going out of business.

2) The stock came under very heavy selling volume in September and especially October. When you consider that happened after a     multi-month decline, it smacks of capitulation.

3) The stock remains heavily-shorted and, even if it is eventually going out of business, can still feature violent short squeezes rallies higher along the way.

Finally, and perhaps of most substance to traders, the daily chart (second chart, below) for AMD is sporting a clear bullish RSI divergence (top pane below, the RSI is simply a relative strength indicator), as well as a bullish MACD cross (bottom pane), while price had made new lows since late-October.

The key to this type of trade is having a clear exit strategy. You are talking about a badly damaged stock that could easily head lower yet. Hence, a strict stop-loss discipline–Not much below $1.80, if that–is suggested. The upside potential reward is a violent short squeeze that sees the rubber band snapping back in the other direction.

_________________________

_________________________

2 Responses to “Advanced Micro Capitulation”

  1. I wouldn’t want to trade AMD, but this is an investor position to hold. This easily rebounds to $5 and probably will hear of some good news and gets it to $7 per share in .long run. Short run, fire management and lower margins so they at least compete with INTL.

  2. […] A line in the sand for Advanced Micro Devices ($AMD).  (chessNwine) […]

Comments are closed.