Zooming way out on AMD's chart shows that the vicious 1-year downtrend since the all-time high in November 2021 appears modest on a weekly logarithmic chart. The downtrend has retraced only .236 of AMD's uptrend since the major low on July 27, 2015. This seems like a reasonable spot for AMD to consolidate it's recent sharp decline over the past 10-11 months.
It's clear that in the intermediate term, bulls need to hold AMD's price above $54-$55 or else the next major level to the downside comes into play. However, in the longer-term, it does not seem unreasonable to think that AMD could retrace 38.2% of its 7-year uptrend and reach $28.09, or perhaps lower looking out years.
This update provides only a brief snapshot of AMD at the secular level of trend. One technical expert whose books guide this author's work says that primary degree of trend covers about nine months to two years on average. So this seven-year chart is definitely the next level of trend higher than the primary degree.
Note that this weekly chart with multi-year levels are not intended as short-term or intermediate term forecasts. Instead, they merely provide a multi-year framework in which to view the recent downtrend. Perhaps the $55 level can be watched, however, in the coming weeks, especially with volatility around AMD's earnings next week or the FOMC presser. This level may be retested. If the level is broken in the coming weeks or months, the next major Fibonacci level becomes the target at $28.09.
Interestingly, the weekly close last week was just above the golden VWAP from the April 4, 2018, low. If AMD can hold this level, it may bounce a bit more before resuming lower.
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On shorter-time frames, especially with earnings and FOMC meeting next week, it may help to watch the following parallel channel and resistance levels for AMD:
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Some of the great feedback on this post revealed that traders do not think AMD's $55 level would hold. First, thanks for the feedback, it's always welcomed and appreciated!! Second, I agree.
Third, it appears that the main point of this post was misunderstood. ST never argued that the $55 support level would hold in the long term or said that $55 was the "final low" or "the bottom" for AMD's bear trend. The main chart may have been ambiguous, but the text is probably more clear. Arguing for a new bullish trend in AMD is inconsistent with ST's many other bearish posts on AMD, NVDA and many other risk assets including indices.
However, ST does not like to fight bear rallies, preferring to allow them to play out and unfold until a strong signal arises that it's done.
So to clarify, the main point of this post was only that AMD had reached a very significant Fibonacci retracement level at $55. It is a Fibonacci retracement of a 7-year price range. ST's main point was only to argue that this important level would likely hold for a period of consolidation since the October 13 low (which briefly undercut to $54.57 and then immediately reclaimed the level). Major declines need time to consolidate just like major rallies.
This post was not as much of a directional idea as an identification of a key level showing its significance with a bounce. Since October 30, 2022, this level has continued to hold as the base / support for the bear rally that has pushed AMD up to $64. It could also be a spot for a bounce on the next decline though it will be weaker then.
Recognizing a key level of support that held does not equate to a bullish argument in the intermediate or long-term, i.e., it's not a grand heroic claim that a new uptrend at the primary degree or higher has suddenly been established. That would be both excessively bold and foolish to say, right?
In shorter TFs, AMD continues to trend higher up into resistance respecting its uptrend lines from the lows. There are many levels where it can fail. And it can fail at any time and resume back to new lows -- or fail and just simply chop in this range for weeks before breaking to a new low.
Trade closed: target reached
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The original post was more descriptive than predictive / prescriptive. But it noted that the major 7-year Fib retracement level at $55.19 was an important level and a reasonable spot for AMD to consolidate its decline by bouncing or chopping higher.
The October 30 post wrote: "The downtrend has retraced only .236 of AMD's uptrend since the major low on July 27, 2015. This seems like a reasonable spot for AMD to consolidate it's recent sharp decline over the past 10-11 months."
In the updates over the ensuing days, ST wrote: "ST does not like to fight bear rallies, preferring to allow them to play out and unfold until a strong signal arises that it's done."
This continues to hold true as this bear rally has pushed higher than most expected.
Further, ST said that it was important to watch the parallel channel off the lows. Despite some whipsaws in all major stocks around FOMC on Nov. 2, AMD has largely held within this channel, especially *above* the lower boundary of it (the up trendline off the lows). As long as the up trendline holds, the rally can continue.
Bear rallies can continue higher than anyone expects, and this bear has been no different.
In the original post, ST also noted that AMD had a "weekly close last week just above the golden VWAP from the April 4, 2018, low. If AMD can hold this level, it may bounce a bit more before resuming lower." Because price had a false break below this long-term level, and then reclaimed it within days, a short-term bullish signal arose. So price has continued to be consistent with that short-term signal—though no one could have predicted the massive rally seen in equities over the past week or the major swings over the past few months—it's been a wild and volatile ride.
In any event, because AMD's price action has largely bounced at $54-$55—the important level identified here—and b/c the bounce has continued higher, this idea will be closed as a quasi success—it's a quasi success because no definitive target was given; however, price has largely bounced to consolidate the steep declines from August peaks, so this analysis was modestly "successful" in a sense.
Long-term, however, ST's view remains the same as written above. The downtrend is likely to continue, and new lows are likely to be made. For now, let's wait for the rally to show us when it's done, keeping the $55 level in mind if / when AMD sells off again.
Hey, I respect the analysis; I think a lot of what you're saying is a moot point until earnings. This stock certainly has a history of sharp drawdowns, and I don't think that the current levels will hold simply as a result of context- if everything else falls around AMD, AMD will fall too.
SquishTrade
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@MichaelEugen1 Hey! I wasn’t saying they would hold. More just recognizing the key levels right now going into a very volatile week potentially. $55 is an important level where price bounced. Not saying it holds, but it could hold temporarily right. I actually said that AMD could fall in the longer term to the next level at $28. So it’s really just noting the levels in the broader context. This particular post is neutral though past posts on AMD have been bearish, with a recent one bullish for the bounce we saw play out so far. Thanks for your comment
MichaelEugen1
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@SquishTrade, It's crazy that we're talking about the possibility of AMD at 28/share when it was 160 at one point; things change fast in these markets! I like that you note that we're going to have a volatile week ahead. Looking forward to seeing how it plays out!
SquishTrade
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@MichaelEugen1 and I agree with you that AMD will follow the equity markets lower when that happens. That’s what I’ve been saying all along. But not every post I write is a trade idea. Many are just levels, technical context and analysis meant to provide visibility — helpful when zooming in in shorter timeframes to actually trade to know what’s happening on higher Time frames and what the broader context is
MichaelEugen1
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@SquishTrade, I tend to do that as well, lol! It'll definitely be an interesting stock to keep an eye on. When I suspect the markets are due for another significant rally, I expect AMD to be among the stocks I will play.
SquishTrade
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Lastly, I suppose I did say this is a “reasonable spot” to consolidate the sharp 2 month decline as it has been. But that’s not saying the 55 level will hold, just that it’s reasonable to think it could. I followed up by saying IF bulls can’t hold, next target is $28
MichaelEugen1
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@SquishTrade, I'll contend with the fact that I think there are big stops before we head down to $28- that's a long way down; support at $49, and humongous support at $37, IMO- not to as it can't get down there eventually.
SquishTrade
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i.e., Reasonable to think that it could hold *temporarily* for consolidation a bit more or upside into resistance
NordicVetMBA
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Hi Squish -
I gotta respectfully disagree on this one. I don't think the $55 level will hold.. and I'll give you 3 reasons why:
1.) inflation has only slightly moderated.. it's like 8.5% instead of 9% right now, and that is completely attributable to the surging cost of fuel and the rising unemployment. People are being forced to cut back, so you are seeing some discounting in other areas, but that is cutting into profits to get rid of unsold inventory, not because "costs" are going down. Layoffs have started.. but they won't really show up in the numbers until mid-November. You really don't want to be a techie in Silicon Valley right now. It's about to get really ugly. Resistant inflation means the Fed keeps raising rates - whether it is 50 bps or 75 bps, I don't think makes a hill of beans of difference, with every rate increase, growth stocks take another kick in the teeth.
2.) Your chart only looks back to 2017, so it has only looked at a growing economy for the most part. The downtrends you have seen are only showing the "fear" of what is coming - but not what is actually coming. If they miss revenues by like 25-30% 2 or 3 quarters in a row, which is likely to happen in even a moderate recession, that $55 looks like a dream that sailed away in the sunset..
Look back at something like Cisco from 2007-2009.. or Oracle from 1999 to 2001..
I clearly (and painfully) remember my $44 / shareholdings in Oracle in 2000 - and watched it drop to $7.86 in about a 3-5 day period. On day 1 it was $10 and I was hoping for a dead cat bounce.. only to watch it sit at $7.85 or so for months.
Trust me... this stuff can, and probably will go much lower. If you talk to anyone in the publishing industry, the advertising revenue has gone over a cliff.. that is the first cutback for the B2B markets and it is a nasty canary in the coal mine. Advertising cuts back, revenues drop, then more layoffs.. then they need to show bottom line numbers because they are missing on the top line - so we see more ad cuts, then deeper revenue declines, and more job cuts.. and that stuff will go on and on for most of a year.
SquishTrade
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@NordicVetMBA, First, thanks for your comment! And I don't mind your disagreement at all—you're always respectful and intelligent in your arguments. :)
Second point -- I didn't take a bullish or bearish view on this chart. So we don't actually disagree. I stated as follows: "It's clear that in the intermediate term, bulls need to hold AMD's price above $54-$55 or else the next major level to the downside comes into play. However, in the longer-term, it does not seem unreasonable to think that AMD could retrace 38.2% of its 7-year uptrend and reach $28.09, or perhaps lower looking out years." This is really just a conditional statement -- *if* $54-$55 holds, then the short term *bear rally* (or chop) can continue. That's all. Mostly just showing broader picture levels here. I'm still bearish, but in the short-term, I think markets are bouncing along with risk assets. I don't think it's wise to short into a major level like $55, right? So I'm not really taking a position in this post though, but my prior posts on semiconductors and SPX and NDX take a clear bearish view (with a short-term "bear rally" bias over the past week, which has played out). So this is really just looking at the bigger picture.