Is It Time to Buy AMD Stock?

AMD shares could be flashing buy, if recent history is any indicator

Aug 24, 2017 at 3:04 PM
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The shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) are up 0.5% to trade at $12.55 today, but have dropped almost 20% since touching a seven-year high of $15.65 about a month ago. However, according to data from Schaeffer's Senior Quantitative Analyst Rocky White, now could be an opportune time to bet on AMD stock's longer-term rally. Below, we'll take a look at Advanced Micro Devices shares on the charts, and outline why the stock's near-term options look attractive.

AMD shares recently came within one standard deviation of their 200-day moving average, after a lengthy stretch above this trendline. The last two times the semiconductor stock pulled back to this trendline, it went on to rally both times over the next month, averaging a gain of 4.91%, per White. The last time Advanced Micro Devices shares dipped to their 200-day, back in early May, they went on to touch the aforementioned seven-year peak not two months later.

AMD stock chart


Amid AMD stock's recent drop, option bears have been coming out in droves. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has racked up a 50-day put/call volume ratio of 0.47, which ranks in the 97th percentile of its annual range. In other words, options buyers have picked up AMD puts over calls at a faster-than-usual clip during the past 10 weeks.

Meanwhile, not even half of the analysts following the equity deem it worthy of a "buy" or better rating. Should AMD stock once again bounce off its 200-day moving average, an unwinding of pessimism in the options pits, or a round of upgrades from analysts, could propel the shares even higher.

Whether bearish or bullish, Advanced Micro Devices' short-term options look attractively priced right now, from a historical standpoint, as the equity's Schaeffer's Volatility Index (SVI) of 46% is higher than just 5% of all other readings from the past year. Meanwhile, AMD's Schaeffer's Volatility Scorecard (SVS) of 86 indicates the stock has exceeded options traders' volatility expectations over the last 12 months.
 

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