Advanced Micro Devices (AMD) – Get Advanced Micro Devices, Inc. Report hasn’t been trading as well as Nvidia (NVDA) – Get NVIDIA Corporation Report lately, but it’s done a pretty good job helping lead tech stocks higher.
Now though, it’s struggling. Shares are down almost 5% today after a downgrade from Barclays. It also follows Thursday’s 3.25% decline.
While yesterday’s fall wasn’t a crushing blow to the bull case, it was still disappointing as it was rejected from a key area on the chart and after making new highs on the month in the same session.
The reversal off the high leaves a bad taste in bulls’ mouth, particularly as we wrap up the first quarter.
Given the strength in this group — particularly AMD and Nvidia — it’s been all over investors’ watchlist, along with Marvel (MRVL) – Get Marvell Technology, Inc. Report and Intel (INTC) – Get Intel Corporation Report.
Now correcting, I want to see where support comes into play. If it doesn’t, we could be looking at a retest of the recent lows.
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At the end of the day, traders are wondering about is what type of rally we’re experiencing. That’s specifically for AMD but also broadly for the Nasdaq and tech stocks.
In other words, is this a giant dead-cat bounce in these stocks and we’re looking at another move lower, or are we amid a new sustainable uptrend?
As I look at AMD stock, I’m trying to keep in mind that it’s the end of the quarter and with that, the volatility has increased a bit.
For now, the stock is losing the 10-day, 50-day and 200-day moving averages. It’s also being rejected from the $125 level, which was support in January, but resistance in February.
If the stock breaks back below prior channel resistance (blue line) and the 50-week moving average, we’ll have no other choice but to look for potential support at the $100 area.
As a natural bull, I hate to say that because it’s been such a painful ride already. But the reality is that unless AMD stock reclaims $117.50, we have to be aware of the potential downside.
If it reclaims $117.50, it will put the stock back over all of its key daily moving averages. That puts the weekly VWAP measure in play, followed by this week’s high near $125.
Above that opens the door to the $130 to $133 area.