Advanced Micro Devices Inc. (AMD) has seen better days. In its first quarter financial results, the company reported revenue that increased 18.3% to $984 million and a $(0.04) per share loss, which were merely in-line with analyst estimates. Gross margins were perhaps the most disappointing element of the report, with first quarter margins of 34% and anticipated second quarter margins of 33%, which are slightly lower than last quarter’s levels.

Several analysts responded by slashing their ratings and price targets. Macquarie downgraded the stock to Underperform with a $10.00 price target while Goldman Sachs cut its price target to $10.50, saying that the stock remains a “show-me story.” These analysts believe that competitors like Intel Corp. (INTC​) may further pressure margins. Jefferies was the only analyst to defend the stock by reiterating its Buy rating and $16.00 price target.

These combination of lackluster first quarter results and analyst downgrades sent the stock nearly 25% lower on May 2 to below $10.00 per share. On May 3, the stock regained some ground by mid-day by rising about 3% to $10.62 per share, as of this writing.

So, where is the stock headed from here?

From a technical standpoint, the stock’s breakdown from a symmetrical triangle pattern wasn’t all that surprising given the declining relative strength index (RSI) and moving average convergence-divergence (MACD) readings – suggestive of bearish sentiment.

The breakdown led the stock to the 200-day moving average at about $9.77 where it has since rebounded back towards S1 support at $10.90. With the RSI oversold at 30.83, the stock could continue to rebound over the coming days as the market digests the earnings report and analyst actions. The sell-off could very well have been ‘overdone’ and recouping some ground is common following this kind of volatility during earnings season.

Traders should watch for a rebound to S2 support at $10.90 or S1 support at $12.10 on the upside. The downside risk is capped by strong support at the 200-day moving average at $9.77, which has held up thus far.  

Charts courtesy of Author holds no position in stock(s) mentioned except for within passively-managed funds.