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AMD Could Take Some Time to Recover from Its Technical Weakness

AMD’s technical indicators

We started this series by discussing the recent major product announcements made by Advanced Micro Devices (AMD) and its rivals Intel (INTC) and NVIDIA (NVDA). These announcements have provided the stocks with some upward movement after their steep falls in December 2018. AMD, NVDA, and INTC rose 4.8%, 6.6%, and 3.1%, respectively, in the first ten days of January 2019. However, they still have a long way to go to recover from the falls they saw in the last few months of 2018.

An effective way to analyze a stock’s momentum is via its moving average, which takes the average of its closing prices over a certain period of time.

A7_Semiconductors_AMD_Moving average

Moving average

One measure by which we can understand a stock’s overall trend is its 200-day moving average, which is indicative of its resistance. When a stock’s price falls below this level, it raises an alarm that its price is likely to fall further. AMD and NVIDIA are trading below their 200-day moving averages, indicating that they’re still in a downtrend and have a long way to go toward recovery.

AMD and NVIDIA are high-growth stocks with very high volatilities. They rose in the high double digits in the first half of 2018 during the cryptocurrency boom and fell even faster when the crypto boom faded. NVIDIA even recorded a new 52-week low of $124.26. These stocks could take almost a year to recover from their falls. The first quarter could be rough for the two companies, but their stocks are likely to rise in the following quarters.

On the other hand, Intel is trading above its 200-day and 50-day moving averages, indicating that its stock is in an uptrend.

Conclusion

AMD’s technical indicators show that the stock is still in the weak zone but is reviving. Its product announcements suggest that its long-term growth prospects look attractive. The stock’s volatility makes it unattractive for long-term investors and attractive for traders.

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