Advanced Micro Devices, Inc. (AMD) reports first quarter earnings after Tuesday's closing bell, with Wall Street analysts expecting earnings per share (EPS) of $0.06 on revenue of $1.26 billion. The stock gapped higher after AMD met fourth quarter profit expectations and lowered first quarter guidance in January, entering the next leg of a strong 2019 recovery effort that has now booked 50% upside.

The rally posted a six-month high on April 3 and rolled over, entering a narrow trading range between $27 and $29. Intel Corporation's (INTC) April 25 profit warning is keeping a lid on the chip sector, but active selling pressure has been limited to a handful of marquee names, while most components are holding short-term support. This mixed price action divides risk equally between bulls and bears ahead of the earnings report.

AMD Long-Term Chart (1990 – 2019)

AMD
TradingView.Com 

AMD stock, which has traded on U.S. exchanges since the 1970s, ended a multi-year downtrend at a split-adjusted $1.82 in 1990 and turned higher in a choppy uptrend that stalled in the mid-teens in 1993. That peak marked tough resistance ahead of failed 1995 and 1997 breakout attempts. The stock finally cleared the formidable barrier at the turn of the century, lifting into an all-time high at $48.50 in June 2000.

A major downtrend kicked into gear when the internet bubble burst, finally ending within two points of the 1990 low in October 2002. The subsequent bounce posted impressive gains through the mid-decade bull market, reversing within six points of the 2000 high in 2006. Aggressive sellers then took control, grinding out steady downside that broke 1990 and 2002 support in November 2008. A reversal into the new decade gained traction, lifting just above $10.00 in April 2010.

Price action hugged 50-month exponential moving average (EMA) resistance into a 2012 test that attracted committed buyers just 19 cents above the 2008 low. It fared worse during a second test in 2015, undercutting the low by a penny before entering a powerful uptrend driven by cryptocurrency mining. That rally unfolded in two distinct waves, reaching a 12-year high at $34.14 in September 2018, while the decline into year end found support on top of the 2017 high in the mid-teens.

The uptrend into 2018 ended at the 18-year trendline of lower highs and the .618 Fibonacci retracement level of the 2000 into 2015 downtrend, in line with its reputation as a high-odds reversal zone. Additional resistance at the .786 retracement in the upper $30s marks a formidable barrier as well, highlighting the challenge faced by bulls after they complete a round trip into last year's peak.

AMD Short-Term Chart (2015 – 2019)

AMD
TradingView.Com

The monthly stochastics oscillator crossed into a buy cycle in February 2018 and hasn't reached the overbought zone yet. This positive positioning should offer a modest second quarter tailwind but isn't likely to stop a high-percentage decline if the company fails to meet earnings expectations this week. That's especially true because the 2019 uptick has reached the confluence of the multi-year trendline and .786 retracement of the 2018 decline.

The on-balance volume (OBV) accumulation-distribution indicator posted an all-time high in September 2008 and entered an aggressive distribution wave that ended in October. Buying power since that time has matched price action and could surge into last year's high at the same time as price in reaction to a bullish catalyst. Conversely, the October low will mark key support if sellers take control after the news and trigger a steep retracement.

The Bottom Line

AMD stock could rally back to last year's high in reaction to strong earnings, but multiple resistance layers in the $30s could stall or delay further progress.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.