Advanced Micro Devices Stock Could Stay White-Hot

Short-term AMD options are relatively cheap at the moment

by Karee Venema

Published on Jul 11, 2019 at 11:19 AM

Advanced Micro Devices, Inc. (NASDAQ:AMD) has staged an impressive run on the charts since bouncing from its 30-day moving average in late June. The shares jumped 3.5% earlier this week on some bullish brokerage attention, and are now within striking distance of a new high. There could be more fuel in the chip stock's tank, too, if recent history is any guide, and speculators may want to considering buying calls to bet on more upside for AMD.

The equity's recent surge just echoes its longer-term trend. Since skimming the $16 mark in late December, AMD shares have more than doubled to trade at $33.42, with their rising 50-day moving average serving as a springboard. More recently, that 30-day trendline flexed its muscle as support during the security's pullback from its June 10 13-year peak at $34.30.

amd stock daily price chart on july 11

There's still plenty of skepticism priced into the outperforming chip stock. While eight of 19 analysts maintain a lukewarm "hold" rating on Advanced Micro Devices, the average 12-month price target of $31.07 is a discount to current trading levels.

Plus, a healthy 12% of the equity's available float is controlled by short sellers. A fresh round of bull notes and/or short covering could create tailwinds for AMD stock.

And with earnings not expected until late July, short-term AMD options are pricing in relatively low volatility expectations -- signaling relatively cheap premiums at the moment. This is based on the stock's Schaeffer's Volatility Index (SVI) of 43%, which registers in the 5th annual percentile.

What's more, there have been seven other times in the past five years the equity was trading within 2% of its 52-week high while its SVI was ranked in the bottom 20% of its annual range, according to Schaeffer's Senior Quantitative Analyst Rocky White. Following those prior signals, AMD shares averaged a one-month gain of 19.6%, with 100% of the returns positive.

 

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