The following appeared in today’s pre-market morning note.
Many stocks have already broken out from multi-month patterns. Some have reached their targets, while others still have upside objectives in play. At this point, consolidation is necessary for new formations to develop.
There are still setups, but many of the tightest patterns — the ones we focus on — are in stocks that are reporting earnings within the next week or so. We typically avoid technical-based trade ideas when a major micro event is directly ahead.
Both of those points apply to AMD, which has been one of our best performing trade ideas over the past few months.
It has now hit both price targets, the latest being 168, which it gapped above yesterday morning.
We first discussed this setup in the 4/11 Opening Look piece, “When to Use Short-Term Charts? Now…”
Here’s that write-up:
“The initial double bottom breakout was negated, but if the stock can reclaim the 90-zone, the breakout would be retriggered, opening the door to a measured move toward 102.
That kind of move wouldn’t put much of a dent in the long-term downtrend, but it would represent a respectable short-term advance—and potentially a starting point if AMD is going to begin clawing back from a brutal 13-month stretch.”
Even though AMD — and many others — had already rallied significantly off their 4/7 lows, it was just starting to show signs of bottoming at the time. As we always say, big patterns can only develop if we first see successful smaller formations. The initial 102 target was hit shortly thereafter, and it eventually gave way to a much larger bullish pattern, which we then profiled on June 17th.
“AMD was the best performing S&P 500 stock yesterday, up nearly 9%. And while chasing any stock up that much isn’t recommended in the short-term, that move prompted a long-term breakout on its weekly chart. Should that breakout see some follow through, the upside objective would be up at 168. That’s very close to the 61.8% retracement of the entire 2024-25 decline (170).
As mentioned above, that target was hit yesterday. Thus, if AMD is going to slow down, the odds suggest that it happens relatively soon, especially with the company earnings next week on Tuesday, August 5th.
Right now, then, the best case would be seeing near-term digestion, which could set the stage for potentially building a much a larger pattern like this.
Bigger picture — even with the stock up about 130% from the April lows — this move still lags prior multi-month rallies we’ve seen over the past few years.
Each of those earlier moves was strong enough for AMD to overtake its previous peaks. That remains the real goal for the stock, and seeing another bullish pattern develop could eventually help it get there.
Beauty is in the eye of the beholder! 😉