AMD Offers Way to Play the Relief Rally in US Equities

3 mars 2023

Price action in broader US equities—the S&P 500 SPX and the Nasdaq NDX in particular—has been tricky over the past few months since the October 2022 lows. SPX for example rallied off the 2022 lows into early December 2022 and it staged a false breakout above the bear market's most predictable trendline, the down trendline from all-time highs. The December 13, 2022, FOMC killed that rally, and and price fell back, rapidly retracing the prior rally's gains. Next, price rallied hard again in January 2023 into early February 2023. Price broke above the December 2022 highs in both the Nasdaq and the S&P 500 but failed back below that breakout point. This typically would be a bearish signal, and it was—after showing choppy stalling action between 4100 and 4200, SPX's price fell further for nearly the entire month of February 2023. Now, price seems to have found a low and is rallying once again. This does not mean the bear market is over, and this has been analyzed and explained in prior SPX posts.

AMD may be a good way to play the relief rally in US stocks. AMD has been forming a series of higher highs and higher lows since its low on October 13, 2022, which coincided with SPX and NDX's 2022 lows as well.

AMD has shown extraordinary strength despite an ugly macro environment. It rallied 62.98% from October 13, 2022 lows to February 2, 2023 highs. Setting aside the multitude of macro reasons to be bearish (including the ever increasing Fed Funds rate expectations and market-pricing of terminal rates), AMD's price action shows the potential for short-term or intermediate-term upside before weakness strikes equities again at some point. Yes, many reasons exist to be bearish, and SquishTrade is certainly not calling for new all-time highs or a new primary uptrend. Instead, this presents a swing trade opportunity.

AMD faces major technical resistance at around $90 and $100, which is shown by teal-blue rectangles on the Primary Chart (above). Fibonacci resistance also shows confluence with these supply zones on the higher timeframe view.

AMD also formed a trading range for this current consolidation starting mid-February 2023. Today, it broke above the range. Sometimes, breakouts are followed by retests, but the strength shown today across the equity space makes it unclear whether a retest may occur. Use risk management and try not to chase especially with imprudent sizing. This will be important to hold into the close.

Supplementary Chart A: Breakout of Trading Range


The Primary Chart at the top of this post also reveals that AMD broke above a key Fibonacci level today at $80.89. This will be important to hold into the close as well for the bullish view. Just overhead lies the VWAP from the prior swing high in early February 2023. Today, this anchored VWAP lies at $82.03. Be mindful of how price responds to that level. Price could pause and consolidate at that level, or also at the .618 retracement levels.

Price also has formed a bull flag. This does not guarantee a breakout, but it tends to support a bullish case as a consolidation pattern. This is shown on Supplementary Chart A.

Here are the remaining price targets based on Fibonacci and resistance / supply zones:
1. $82.00 (most conservative—VWAP from prior swing high shown on Primary Chart above)
2. $82.43-$83.97 (conservative)
3. $85.48-$89.00 (moderately aggressive)
4. $96.55 - $100.00 (aggressive)

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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.

Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.

DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.

6 mars 2023

Note

After the breakout Friday and today, resistance was found where one might expect. Initially, this channel resistance (bull flag) should show resistance, but to continue, obviously, this resistance will have to break on the next push or two.

In the meantime, AMD is pulling back perhaps to retest the breakout or a key Fib retrace level

6 mars 2023

Note

The key Fibonacci level to watch for support (if the overall thesis of higher into March OPEX is valid) is $78.75 - $80.00. This is based on Fibonacci and other forms of support expected to act as a boundary to the consolidation seen today.

8 mars 2023

Note

Price has reached all the conservative targets. The moderately aggressive target zone starts at $85.48. Price reached an intraday high of $85.77 today.

AMD traded at $81.32 at the time this analysis was published. Given weakness in the markets and the increasing terminal Fed Funds rates (which markets seem to be taking in stride this week due to hedging flows perhaps), stops should be tightened to make any short-term trades risk free.

8 mars 2023

Note

To be clear, my intermediate and longer-term views remain bearish. Equity markets have not seen the lows. Check out my posts as well as other talented authors' posts on the yield curves. But just because a recession is coming doesn't mean it will be simple timing the market's slide.

9 mars 2023

Note

AMD reached nearly $88 ($87.81). It has therefore claimed the moderately aggressive target zone sufficiently. Major resistance lies just overhead at $89-$90. On my own position, profits were taken already given choppiness in overall markets. But it would not be surprising to see AMD continue a bit higher here to $90-$92.

9 mars 2023

Note

A prior update yesterday cautioned that stops should be tightened to make any short-term trades risk free. These "tightened stops" would likely have triggered with the selling today.

As mentioned earlier today when AMD was still pushing higher to $87-$88, my own position was closed quickly when AMD made its push higher. This was because the market has been choppy and unpredictable, i.e., whipsaws are so frequent.

In short, SquishTrade no longer holds an open position on AMD, and any trade with good risk management likely would have been stopped by the pullback today to take available profits.

This does not mean AMD rally is finished. The pullback can be studied for how far it retraces, and whether uptrend structure remains intact. If the uptrend structure remains intact more or less, then AMD may be able to push into the low 90s in the coming weeks. This may actually provide a secondary bullish setup to be honest. Will try to update this post as price data evolves.

14 mars 2023

Note

AMD's pullback found support right at the uptrend line, i.e., the parallel channel support. Back into the moderately aggressive target zone today.
Please see the last update from March 9 which stated : "This does not mean AMD rally is finished. The pullback can be studied for how far it retraces, and whether uptrend structure remains intact. If the uptrend structure remains intact more or less, then AMD may be able to push into the low 90s in the coming weeks. This may actually provide a secondary bullish setup to be honest."

Before AMD's selloff over the past few days, ST mentioned in an update that stops should be tightened as AMD pushed into the 87-88 range. The update also noted that ST had taken profits on a short swing play already when price hit $87-$88. Then price pulled back along with the market's response to SVB and other bank failures.

The secondary bullish setup ensued for nimble players. AMD pulled right back to critical support at the key VWAP anchored to 2022 lows and retesting both breakout points:

16 mars 2023

Note

16 mars 2023

Trade fermée: cible de profit atteinte

AMD is unlikely to push past 100 without a fight, though. SquishTrade is not interested in catching the entire move for every technical setup. That is a recipe for losing when sharp reversals take place unexpectedly—and such reversals are always unexpected especially in this bear market where volatility is high and news catalysts hit fast. So this idea will be closed. It was a nice run from $81.32 to $96.00 = 18%. And the bullish rip occurred twice after AMD rallied then pulled back to retest the breakout areas and support at 82-83 area only to rally a second time.