AMD. A big bagrain or a big fraud?

NASDAQ:AMD   Advanced Micro Devices Inc
238 8 10
Yesterday we´ve probably seen one of the best daily performance from AMD             shares in company history. Why is that? Licensing agreement with the chinese. The chinese will be able to develop their own server SoC with a cooperation and based on AMD             technologies. Means, they will develop their very own version ot the latest "Opteron" generation and pay to AMD             for it.

It is not huge only for AMD             , it can be huge for the whole sector. There is someone who´s talking about start licensing the GPU technology as well and, based on ARM Holding experience, that wouldn´t be a bad idea at all.

If happens, this will bring the chip makers to a new stage of competence for market share: the fight for the ending client would lay on the shoulders of license aquirees while a hypotetical AMD             , Intel             and else may surely leave all or big part of manufactoring operations and concentrate on high value-added R&D. AMD             is not the first one to do it and not the biggest, and not the most advanced             . But it is the chance for AMD             itself to escape from a deadly trap while others haven´t followed the path. Capturing a solid piece of this market will be more than enought for AMD             to come back to a solid profitability, recovering strong business model and availability to design a long-term strategy.

Which are the bad points? If AMDs experiment with the chinese show the path is good, Intel             is bigger than AMD             . AMD             arrived first but remember what happened with K8 CPUs when Intel             took the Core2Duo family out of the hat. If I were AMD             , I´d start securing as much long-term contracts as possible before the others will realise the idea is good. If they secure at least 3-4 more licensing contracts all over the world, it is a strong, solid beginning. Tune your Twitter to news from AMD             and Intel             , it can be busy.

Second point. Not far away from now, we´ve already seen some ineficcient chinese enterprise to bankrupt. The main question here is: what is THATIC? I recognize, I googled it for 10 minutes and could only find some unconfirmed relationship to China Academy of Sciences ( CAS ) or Dawning Information Industry. If that´s the case, AMD             is in good hands. But for now, the whole licensing agreement looks rather a desperate move. At 2.60 per share you can take a risk. But at 4 per share.... And also that number, 293 million USD in cash. Not trully enough for the whole bunch and complete support on AMD             server technologies, right?

Third question, what the US Government will think? There was no reaction for now, probably, because of the second point. But if the deal starts becoming a crude reality and the Gov             will find itself in a situation when the rest of manufactorers, specially, Intel             , will want to follow the path, AMD             may face serious problems which will require quick and severe actions.

Technical analysis confirms: 4-5 figures per share has been a massive frontier and critical level for AMD             shares since always. Yesterday, it got rid of weekly 200 MA and WMA (on chart) but stopped at 3.99 and I don´t think that´s coincidence. AMD             still has a lot to deliver.

As said before, tune your Twitter to AMD             , follow the evolution of the company and check Q2, Q3 and Q4 reports. If the shares start climbing little by little, go over and secure 5 figures per share, and the results are solid, and we get more information about the chinese partner, jump in. If the quote gets stuck somewhere in 3-5 range, this is a patience zone and good option for these who bought at 1.90-2.50 to secure partial profits.
Comment: AMD has added 26% since this was posted back in April. Therefore, that´s more than a 50% in less than 3 months. We may spend a lot of time searching for a company with such a positive return!

Now the shares are coming back to the useful range of 4-5 USD per share. I believe AMD will make profit of a new market rally as S&P 500 index has barely added something since April while companies shares performed outstandingly.
Trade active: Important Q2 earnings tomorrow. Intel has shown weakness, AMD may follow with an important decline in the stock value!
Trade active: Solid Q2 reports and AMD up another 10% . One of the best year performers so far
Comment: Holding longs!
Comment: Arriving to a next critical level of 10.24 per share. The potential reversal zone would be 10.24 to 11 per share
Trade closed manually: I will close my longs today as I expect a retrace. Once it ends, will open new longs

Comment: Somebody asked me once: why do you close your trades so early? You could perfectly hold 5-6% more!

First of all, if I already made 1000% in a year (!) I honestly don´t care about additional 5%.
Also, I follow my plan. If my plan says "close at 9", I will close at 9 although the price jumps to 16. And if such a thing happens, I will be angry at myself because my plan was not good enough to forsee 16. Will have to analyse in deep why it worked only for 9 because next time, instead of ging my way, it can perfectly go the opposite way.
Finally, if I get into a 20% trash in 1H candle, that will make me angry enough to not care about the 5-6% of additional profit I may have got...

Ugly ugly chart. I believe 9.40 is a crucial level, also the black trendline can make difference between longs and shorts.

AMD shares gaines almost 500% since the beginning of the year, a massive market outperformer and a true 2016 star! Now it is entering into a "water-splitting" terrotiry: a price range between 10.24 and 11.66 has been separating bulls from bears since 25 years ago.

Which is my strategy? Check if weekly chart closes above 11.66. Otherwise, I will close my longs here and will re-enter after a correction. I believe that what we have lived so far is a Wave 1 of a huge bullish run that AMD may experience during next year.
captain_smollett PRO captain_smollett

Long-term chart with a reversal zone highlighted
i'm still going long on AMD. A huge value in my eyes! Going to 8!
+1 Reply
i've read that Intel is currently licenceing graphics technology from NVidia. In the article it states that Nvidia and Intels deal will expire in 2017, and that Intel will no longer be renewing w/ Nvidia next year. All signs are pointing towards AMD.
+1 Reply
Great one! Yes, Intel and AMD had some points in common when the Crossfire technology was introduced and they also supplied Apple for one of the previous generations of McBook Pro. A cooperation would be worthy both for Intel and AMD on one side.

On another side, Intel themselves have developed a very good integrated graphic chips. Their main problem is that they have to change their business somehow to adapt to a lowering PC demand and AMD won´t be of much help in this. I´d expect from Intel something like starting to licensing one of the previous generations of Core2Duo or even selling some factories to chinese or russians, getting cash, reducing the manufactoring facilities and also the personnel.
Great analysis, but I just want to add one sliver of extra information - Intel, the largest CPU maker just the other day announced 12,000 due to decreased demand for consumer CPUs. What does this say about the sector? Does AMD have the ability to survive in the market?
+1 Reply
Thank you for checking =) Actually, AMD has been surviving since many years ago. So, they´ve literally reached the bottom. Regarding Intel, I think numbers are shocking because it is 11% of all Intel´s employees but we haven´t seen any sudden drastical declinings in earnings or sales. PC market hasn´t perfomed well since people buy smarthones and tablets.

I believe both Intel and AMD are changing their business model and AMD definitely has a big chance here! As well as we do with that price of AMD shares =)