Advanced Micro Devices, Inc. (AMD) is making a comeback. The stock had one of the biggest breakouts in 2018, rising more than 200% before the stock market turmoil that took place since October. AMD shares have plunged 40% since then but are now on the verge of reversing course for another massive rally.

The semiconductor stock is forming a bullish descending triangle pattern, which gives us clear levels to watch going forward. All triangle patterns are some of the easiest technical formations to spot on a chart, and they also give us an easy-to-predict expected move on a breakout.

Once a breakout occurs, either above resistance or below support, the following move is roughly the height of the pattern in the same direction. In this case, that's $12 per share.

Height of the triangle pattern on the chart of Advanced Micro Devices, Inc. (AMD)
Optuma

For a stock trading at just $20 per share, $12 is a significant amount. In the case of a breakout lower from the support level on the chart, we would be looking at a price of $4 per share – a level the stock hasn't touched since 2016. However, an upside breakout, depending on exactly when it occurrs, would give us a potential 60% rally. Take a look:

Measuring a potential breakout on the chart of Advanced Micro Devices, Inc. (AMD)
Optuma

The reason I'm showing you only the upside breakout is because triangle patterns tend to be continuation patterns, following the previous direction of the stock. Back in 2016, AMD stock traded for less than $2 per share. Clearly, it's rising at the moment, and we'll stay with that trend until it's broken.

On the downside, we have a clear line in the sand to exit, and go short, at $16. Once shares break below that key level on a closing basis, look out below. If shares hit $4 again, that would be a 75% plunge.

The Bottom Line

Advanced Micro Devices stock is stuck in a descending triangle pattern at the moment, but it won't stay there long. Eventually, a breakout will occur. If Advanced Micro Devices follows its uptrend, shares could post 60% upside in quick fashion. If it continues lower, look for an all-out collapse in the stock as it heads toward $4 per share.