Key Takeaways
- Advance Micro Devices shares moved sharply higher in premarket trading Wednesday after the chipmaker posted better-than-expected second quarter revenue and issued an upbeat sales outlook for the second half of the year.
- Trading volumes have remained below average throughout the stock’s recent sell-off, while the relative strength index indicator nears oversold levels, setting the stock up for a post-earnings bounce.
- AMD shares may encounter overhead resistance at key chart levels including $151, $170, and $187.
- A bars pattern, which takes the stock’s trending move from late October to the March high and positions it from Tuesday’s low, predicts a longer-term upside target of around $305.
Advance Micro Devices (AMD) shares surged more than 9% in premarket trading Wednesday after the chipmaker posted better-than-expected second quarter revenue and issued an upbeat sales outlook for the second half, boosted by robust growth in its data center segment driven by artificial intelligence (AI) demand.
The post-earnings pop follows a period of heightened volatility in the stock, which has fallen around 35% from its March 7 record close. The recent downturn stemmed from concerns about the company’s ability to capture a greater share of the booming AI silicon market and recent broad-based selling across the chip sector amid worries over tightening export curbs with China.
Below, we take a detailed look at AMD’s chart and use technical analysis to identify key price levels of interest to investors.
Nearing Oversold Conditions
Since setting a record high in early March AMD shares have oscillated within a descending channel, a chart pattern that indicates a downward trend in prices.
Following a rally to the channel’s upper trendline earlier this month, the price has fallen around 25% to trade below both the 50- and 200-day moving averages leading into the chipmaker’s quarterly results.
However, volumes have remained below average throughout the recent sell-off, while the relative strength index (RSI) indicator nears oversold levels, setting the stock up for a post-earnings bounce.
Key Resistance Levels Amid Earnings Surge
If bulls regain control of the action post earnings, investors should eye three important price levels where AMD shares could run into overhead resistance.
The first sits around $151, a level on the chart where short-term traders could lock in profits near a trendline connecting a series of comparable price action between January and July, currently sitting just below the rising 200-day moving average.
A breakout above this area may fuel a move to $170, where the shares may encounter resistance near two periods of narrow consolidation throughout most of February and in the second half of May.
Further buying could see a retest of the $187 level, where the stock would likely run into selling pressure near the July swing high, positioned just above the descending channel’s upper trendline and January peak.
Longer-Term Bullish Target
To forecast a longer-term upside target, investors can use a bars pattern. To do this, we take AMD’s trending move from late October to the March high and position it from Tuesday’s low, which predicts a target of around $305.
AMD shares were up 8.9% at $150.81 in premarket trading about two-and-a-half hours before Wednesday’s opening bell.
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