Stock Jumps 12% In 2 Days, More To Come

Last week when this company announced its earnings they came in below expectations on revenues and guided Q1 revenues lower. Its earnings were in-line with expectations.  

This is not good news, yet the stock jumped 12% over the subsequent 2 days!

Advanced Micro Devices (AMD) has long been a competitor of Intel’s, but last week AMD’s competitor status changed.

In its SEC filing of its annual report, Intel added AMD to the data center competition section.

This change in Intel’s annual report filing is validation from the industry’s insiders that AMD’s smaller and faster processors are likely to continue to increase its market share in the data center server chip market.

Intel’s data center server chip business generated $23 billion for Intel last year, while AMD’s revenues in this segment were only $6.5 billion.

This leaves a lot of room for AMD to experience massive growth even with small market share gains.

A company’s fundamentals may be good for providing the big story that can drive a stock price for months or years, but fundamentals are not always very timely for trading or investing so we look at charts for that.

As you can see in the chart below, last week’s run up after the earnings report on January 29th created a breakout of a 3 month base. The breakout level was at the top of this base, around $22.25.

https://lh6.googleusercontent.com/fpU-fdf1QQfO6HeVzBKvtMAKEx4ZuHp5W-gyhkmlqqVwyOQNv26ogrP0_Kel5N1zgJtZRuLvBernGW8G0n4Js_JQSLfJnebfBcjpw3SV72JMrau-CS9q0-vDCn9faKKCtr_NuSO2

Additionally, there is tighter consolidation on top of the 200-day moving average with a range of $19-$22.25. For the long-term picture, this range is the support that AMD should hold if it pulls back further.

The simple setup for the current flag pattern would be to look for an entry after AMD closes over $24. This would represent a resumption of the breakout.

A reasonable protective stop would be under $22 as this would suggest the top of the base may not offer expected support.

The big picture for traders should be to keep your eye out for the point at which the current correction starts to reverse, and consider this stock to have massive upside potential as long as its over its 200-day moving average.

Trade smart,

Rick Nartarian, Chief Investment Officer
Darwin Wealth Creation