Morgan Stanley separately suggested that AMD has a "significant opportunity" from cloud gaming chips following its success in winning part of Alphabet Inc.'s (GOOG) gaming initiative. The analyst firm estimates that AMD earned $50 million in cloud gaming revenue in Q4. Despite the bullish commentary, the Morgan Stanley analyst maintained his Underweight rating and price target of $17.00 on shares of the chipmaker, suggesting an already lofty valuation.
Many chipmakers have also been affected by the ongoing U.S.-China trade war. With the Trump administration pushing U.S. allies to abandon Huawei, many companies are worried about retribution from a market that accounts for a significant portion of revenue for U.S. chipmakers.
From a technical standpoint, AMD stock broke out from the pivot point at $23.77 toward trendline and R1 resistance at $25.28. The relative strength index (RSI) moved toward overbought territory with a reading of 61.88, but the moving average convergence divergence (MACD) could see a near-term bullish crossover. These indicators suggest that the stock could have more room to run following today's rally.
Traders should watch for a breakout from trendline and R1 resistance at $25.28 to R2 resistance at $27.02. The longer-term price target for the ascending triangle breakout would be reaction highs of $29.00 per share made back in October. If the stock fails to break out from resistance, traders could see a move lower to retest the pivot point at $23.77 or trendline and 200-day moving average support at around $21.44.
The author holds no position in the stock(s) mentioned except through passively managed index funds.