Advanced Micro Devices, Inc. (AMD) shares fell more than 4% in early trading following its significant rise over the past seven sessions. The introduction of the Radeon Pro V340 graphics card sent the stock sharply higher with its advanced security features and promise to address high-visualization workloads for datacenter markets. Intel Corporation's (INTC) troubles with its 10-nanometer (nm) chip could also create a window of opportunity for AMD to capture greater market share in key segments.
Last week, Rosenblatt analysts raised their price target on AMD stock from $27.00 to $30.00 per share, which represented a premium of more than 40% to the then-current price. The analysts believe that the company could see double-digit growth over the coming years given its many tailwinds, citing positive institutional investor meetings that could keep capital flowing into the stock. Many other analysts have also been bullish on the name. (See also: AMD Shares Could Double in Coming Months.)
From a technical standpoint, the stock trades at overbought levels, with the relative strength index (RSI) trading above 75.00 in recent sessions. The moving average convergence divergence (MACD) seems to support this uptrend, but traders could see some profit taking over the near term. A potential bearish engulfing on Tuesday would confirm these trends and set the stage for some sideways or lower movement ahead.
Traders should watch for some consolidation above R2 and trendline support levels at $23.19. If the stock breaks down from these levels, traders could see a move lower to R1 support at $20.67 or trendline support at around $19.50. If the stock rebounds from these levels, traders should watch for a breakout to fresh highs, but that scenario appears less likely in the near term given the bearish movement. (For more, see: AMD Short Sellers Down $3B So Far in 2018.)
Chart courtesy of StockCharts.com. Author holds no position in the stock(s) mentioned except through passively managed index funds.