Advanced Micro Devices (AMD) has been strong over the past year, up 290%. That beats the semiconductor sector (SMH), up 55%, and the S&P tech sector, up 30%. Among the specialized CPU and GPU chip makers, AMD leads. Intel (INTC) sits close behind, and Marvell (MRVL) also shows a decent gain. Nvidia (NVDA) and Broadcom (AVGO) are the laggards of the group. Calling Nvidia a laggard sounds odd after years of fast growth, but it shows the cyclical side of stocks, where quiet, sideways phases often follow big pushes.
Chart levels
Yesterday AMD hit a high of 630.80. In pre-market it trades well above that, around 640. That old high, 630.80, becomes a line to watch as possible support going forward.
Yesterday's candle was a bullish engulfing pattern: a larger green candle that fully covered the previous day's smaller red candle. More upward movement today would give the confirmatory signal.
The old highs line up with the lows formed after a gap near 584. That gap opened near 560. The upward sloping white trend line is still in play. The 5-day EMA (dark blue line) sits near 604.67.
RSI, the momentum measure, broke its red trend line upward, pushed above the 50 midline, and moved into overbought territory. In a trending market that is usually a sign of more strength ahead, and it points to a faster pace of gains. The volume profile shows most trading happened between 472 and 528, with only a small cluster of activity at these higher levels. Recent volume spikes are also visible.
Example trade
The setup targets the January 15th monthly expiration, a longer-term horizon of 112 days. The expected move over that window is plus or minus 26.3%.
The trade is a 690 / 750 / 810 call butterfly for a $3 debit. It carries a bullish outlook. Max loss is $300, the debit paid. Max profit is $5,700 if the stock expires right at the 750 double-short strike, giving about a 1-to-19 or 1-to-20 risk-to-reward. The odds of pinning that short strike exactly are slim, but it can happen. The lower break even is 693, 8.3% above the current price. The upper break even is 807, about 26% up, which lines up with the 26% expected move.
This is also the week of the next earnings event. You may want to close a trade like this before earnings hit, unless you are willing to take on the extra risk.
