AMD at a Crossroads: Buy Now or Prepare to Lose More? | Don’t ignore this chart!

Advanced Micro Devices (AMD) slightly beat Wall Street’s earnings and guidance expectations on Tuesday, but its shares fell 7% instead of rebounding. AMD has hit a 61.8% Fibonacci retracement. This can present an ideal “buy low” opportunity for many traders, or a “ready to exit” threshold for those who bought stocks near the bottom of an uptrend.

AMD’s decline brings several questions to the forefront. Should I buy or sell AMD? What are the technical or fundamental factors that drive this decision? What are the key levels to pay attention to?

basic picture

AMD’s EPS (61 cents) and revenue ($5.47 billion) barely beat analyst consensus. They were substantially in line with what Wall Street had expected. The company’s estimates for the current quarter were also in line with analyst forecasts. It’s not bad, but it’s not great either.

But a huge potential growth driver is AMD’s expected AI chip sales of about $4 billion this year. Nevertheless, stock prices plummeted. So if AMD’s plunge was a way to correct market overvaluation, are the company’s AI chip predictions already reflected in current price levels?

Analyst price targets are mixed. But before that, let’s look at the technical picture.

AMD and the AI ​​Revolution

If you look at AMD stock on the weekly chart, you can see that it has been on a downward trend since hitting an all-time high of $227.30 in March.

Chart 1. AMD stock chart. AMD’s relative performance against AI chip leader Nvidia will begin to decline after November 2022. AMD is also chasing the semiconductor industry. Chart source: StockCharts.com. For educational purposes.

If we go back to the second week of November 2022 (see the vertical blue line), we can see a slow but steady rise for AMD compared to the larger technology sector (XLK). This line marks the beginning of the current AI trend sparked by OpenAI’s public launch of ChatGPT. This new AI “revolution” has catapulted chipmakers like AMD into the spotlight, positioning the industry as fertile ground for expansion and a fiercely competitive arena for semiconductor companies.

So while AMD still outperforms the general tech sector by 21%, the massive semiconductor industry ($DJUSSC) lags -25.85% and NVIDIA, the world’s leading AI chipmaker, lags by a whopping 70%.

AMD missed the AI ​​boat and fell sharply behind. However, forecasts show that AMD’s catch-up prospects are rapidly improving. So is this what is driving the indecision at the current level?

On AMD’s daily chart (see below), the stock is trading near the 61.8% Fib retracement level. This is a level that can determine success or failure for a trader. For those pursuing long positions, this represents a major downside (a drop below this level increases the downside in the outlook). It also represents the lowest level at which those who have entered the bottom of a recent uptrend can exit long-term trades.

Chart 2. AMD’s daily chart. The stock is at a critical juncture, and its next move could trigger a strong buy or sell signal depending on the results and underlying momentum.Chart source: StockCharts.com. For educational purposes.

Money Flow Index (MFI) It is trending upward, creating a bullish differential between the price and the buying pressure it represents. that much Chaykin Money Flow (CMF) This indicates stronger selling pressure. If you’re planning on investing for the long term, you’ll want to see both indicators trending in the same direction.

3 levels to watch

• 61.8% Fib Retracement Line: A close below this level would invalidate the long-term uptrend and possibly reverse it.
• $133 Price range: The 2024 low and 2023 high could act as the next level of support.
• $124 Price range: This range, a cluster of resistance and consolidation levels in 2023, could serve as an area of ​​much lower support. However, a breakout below could indicate further downside risk.

What are analysts’ price targets?

Analyst price targets for 2024 are quite broad.

• The top price target is between $265 and $270.
• The median price target is between $185 and $190.
• The lowest target price is between $120 and $140.

This means that the current price is near the bottom of the target range and well below the average to high consensus.

takeout

AMD’s earnings and guidance are satisfactory, so AMD’s stock price is at a critical crossroads. Technically, AMD is at optimal buying levels, but momentum doesn’t seem to be in favor of the bulls. Meanwhile, it’s unclear whether AMD’s AI chip prospects are solidified or underestimated. Although we cannot predict the outcome of AMD’s AI performance in the near term, we can identify levels of technology that could trigger a rebound or collapse. Momentum and price action are very important, so watch them closely over the next few days.

disclaimer: This blog is for educational purposes only and should not be construed as financial advice. You should not use any of our ideas and strategies without first evaluating your personal and financial situation or consulting a financial professional.