Chip Stock May Be Eyeing Its Next Big Win

AMD pullbacks have been supported at the 40-day trendline

May 16, 2019 at 12:12 PM
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Tech stocks have been in focus lately, amid the escalating tariff war between the U.S. and China. Unlike several of its Huawei-exposed peers, though, Advanced Micro Devices, Inc. (NASDAQ:AMD) stock is higher in today's trading, already up 2.8% at $28.34. And, per data from Schaeffer's Senior Quantitative Analyst Rocky White, this chip stock may be eyeing its next leg higher.

Specifically, AMD is trading within one standard deviation of its 40-day moving average, after a lengthy stretch above this trendline -- defined for this study as the stock being above the trendline 60% of the time in the last two months, and eight of the previous 10 trading days. There have been nine other times the security has made similar tests of support here within the past three years, resulting in an average one-month gain of 9.74%. Based on its current perch, another move of this magnitude would put the equity near $31.10 -- back near its September highs.

Daily AMD with 40MA Since May 2018

On the charts, Advanced Micro Devices has been consolidating its gains since touching a six-month high near $30 in early April. The aforementioned 40-day trendline has been a source of support for the shares, and more recently the $26 mark has provided a foothold, allowing AMD to rack up an impressive year-over-year gain of 121%.

Digging deeper, the chip stock's Schaeffer's put/call open interest ratio (SOIR) of 1.09 ranks in the 82nd annual percentile, meaning short-term speculators are much more put-skewed than usual. Should AMD once again bounce off its 40-day, and unwinding of pessimism in the options pits could bolster the equity.

Lastly, AMD's Schaeffer's Volatility Scorecard (SVS) stands at a whopping 99 (out of 100). In other terms, this shows that the shares have regularly exceeded options traders' volatility expectations in the past year.


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