Advanced Micro Devices (NASDAQ:AMD) is always a stock to buy, especially when share prices decline. And when it comes to buying on the dip, the bigger the better.
Opportunities like those have been hard to come by these days, despite the worst macro-economic setup in history. Equity bulls have had their hands firmly on the wheel as they drove the Nasdaq within 5% of all-time highs.
But today things are different, because, unusually, AMD stock is lagging competitor Nvidia (NASDAQ:NVDA), and therein lies an opportunity
Wall Street is unanimously enamored with headline hog NVDA as the stock marked fresh highs. Meanwhile, AMD came into Tuesday morning coiled and below important levels. The coil broke upwards, but then faded back to the same neckline to test for footing.
However, that isn’t the end of the story. Today’s setup is a simple concept, though somewhat complex in execution. Advanced Micro stock has been the best stock in the entire S&P 500 for two years running. It’s a safe bet to assume the company will continue its winning ways.
The entry points may differ from one investor to another but AMD is a screaming “BUY,”as long as investors avoid the obvious mistakes. Most of those occur when stakeholders get on the gravy train too late in thematic growth.
Opportunities in AMD Stock for 2020 and Beyond
AMD has been a reliable gauge of the risk appetite in the stock market, sometimes more reliable than the VIX. I do worry when the stock lags while NVDA and the Nasdaq are soaring.
But the way I see it, either AMD has a catch up trade brewing or the markets are going to correct. In this case, both outcomes are buying opportunities.
The first upside catalyst comes if the bulls take out Tuesday’s high. Doing so would bring AMD closer to $60 per share, which would be an all time high.
But this would also trigger a secondary bullish pattern, with at least another $10 from there. These are pure technical triggers, but they have support from the company’s excellent fundamental outlook.
Keep in mind this is not a cheap stock; in fact, it’s downright expensive. But cheap prices aren’t the reason people invest in growth stocks such as AMD. To deliver big growth they need to splurge with spending.
The Base is Set
About a month ago I wrote about a breakout in progress that ultimately came to fruition. After that, the stock successfully tested the breakout neckline for footing. Now the bulls have the base set so they can buy the dip, if and when it happens.
AMD is a momentum stock, so remember that it runs fast in both directions. So conversely, if bears have their way with short term price action, the first buy-the-dip opportunity will be near $54 per share. Below that, there is some support at $52.50, but much stronger still near $51.
In mid-April, AMD stock broke out from about that mark, so any dips that don’t violate the neckline means that the bulls retain control of its price action. The bears will remain on their heels for as long as this is true.
For AMD stock to lose its momentum, it would take a market-wide correction. This team is too good to err on its own.
To put it simply, betting against proven winners is silly. As long as CEO Lisa Su is in charge AMD is headed higher.
The pandemic proved that the world is going all digital, all the time. The lockdown forced everyone to embrace that digitization is not a fad, but here to stay. The assimilation will be exponential as millions are exposed to remote approaches for the first time.
There will be demand for all kinds of tech for decades and AMD is one of few suppliers of the e-brains every consumer tech product is looking for. There is plenty of room for all of them to thrive. It may tag in and out of the limelight alongside NVDA and Intel (NASDAQ:INTC), but eventually they all will win.