Bull Signal Flashing Could Give AMD a Second Wind

Several layers of underlying support are in place for AMD

Digital Content Manager
Jul 9, 2020 at 11:10 AM
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The shares of chip name Advanced Micro Devices, Inc. (NASDAQ:AMD) seem to have hit a plateau since their latest run at record highs back in early June. The security nearly clipped its Feb. 19 peak of $59.27 before falling back below $57, which has kept a lid on the shares since. Investors shouldn't be discouraged just yet though. There's plenty of support underfoot that could keep the wind in AMD's sails, including the $51 level and a bullish trendline that, if history is any indicator, could send the stock right back up the charts. 

According to a study from Schaeffer's Senior Quantitative Analyst Rocky White, AMD just came within one standard deviation of its 80-day moving average after a lengthy period above the trendline. White's modeling shows five similar signals occurring in the past three years. One month after these signals, AMD was higher 75% of the time, and averaged a one-month return of 4.5%. A similar move from AMD's current perch at $55.62 would put the equity at $58.12 -- back within a chip shot of its record highs. 

A round of analyst upgrades could help the stock along, too. Right now, 14 analysts call AMD a "buy" or better, while 11 say "hold." Plus, the consensus 12-month price target of $54.40 is a 2.2% discount to current levels. 

Pivoting to the options pits, sentiment is looking much more optimistic. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 4.58 calls were picked up for every put in the last 10 days. This ratio sits higher than 98% of readings from the past 12 months, indicating an unusually heavy appetite for long calls.

What's more, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.65 stands higher than just 2% of readings from the past year. This means short-term options players have rarely been more put biased. 

That being said, speculating on Advanced Micro Devices stock's next move with options looks like a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 49% stands higher than just 15% of readings from the last year. This means options traders are pricing in relatively low volatility expectations for the time being. 

 

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