(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Advanced Micro Devices (AMD) continues to drive higher, with the stock now trading over $14, and it looks like it is getting closer to breaking out. In an article last week on Investopedia, we noted that the options market was pricing in a potential rise in the stock to $17. (See more: AMD's Shares Could Rise 20% to $17, Option Trades Show.) Using technical analysis, the current trading patterns are beginning to support that notion as well. 

The stock has been grinding higher along an uptrend now since February 2016, when the stock was trading at roughly $2. About one year later, the shares reached $15.50. Starting in March, volatility in the stock has increased and it has traded sideways with a series of significant price swings. But the one thing that has remained constant is the trend line. 

$15.50 Is Resistance




The chart above shows how Advanced Micro Devices stock has topped out on two occasions at $15.50 and has created a formidable resistance area. The pattern currently in the chart is called an ascending triangle, which is a bullish continuation pattern. It signals that shares could be set to rise and break above the $15.50 level once the trading pattern is complete. 

Ascending Triangle




The pattern could be getting close to completion as well. The hourly chart above indicates that the pattern is nearly 61.8 percent complete. The number 61.8 has vital importance because it happens to be part of the Golden Ratio, which comes from the Fibonacci sequence of numbers.

Some traders use this series of numbers or ratios in technical analysis, to indicate Fibonacci retracement levels to predict when a stock might reverse direction. The number 38.2 percent is used as well, and is also essential. When added together with 61.8 percent, the two numbers equal 1, or 100 percent. Applying the same logic here would imply that the pattern is nearly complete and could be set to rise in the not-too-distant future.

Critical Support

The upward sloping trend line has been a source of significant support for AMD stock over the past year and a half. That trend line is crucial to the stock's future success as well. Should the stock breach that trend line, it would likely set off a wave of selling, sending the shares lower. 

Some investors and algorithms use these types of technical signals to determine their entry and exit points, which makes it valuable see the patterns and trends forming. 

For now, the trading pattern and age of the pattern suggest shares of AMD are getting set for a rise above $15.50.


Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.

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