AMD Stock Breaks Out but Approaches Overbought Levels

Advanced Micro Devices, Inc. (AMD) shares rose around 2.5% on Monday after Cowen & Co. reiterated its Outperform rating and raised its price target  to $25.00 from $21.00 per share. After meeting with CEO Lisa Su, analyst Matthew Ramsay pointed to management's determination to capitalize on opportunities to gain market share in data centers and client markets. The company could also gain from its seven-nanometer (7nm) products expected later this year.

Cowen's upgrade of AMD stock comes shortly after Intel Corporation (INTC) announced another delay of its 10nm chip, which is now expected to come out sometime late next year. Bank of America analysts downgraded Intel stock to Neutral from Buy following the delay while lowering their price target to $56.00 from $62.00 per share. AMD, NVIDIA Corporation (NVDA) and other companies could use this opportunity to "leapfrog" Intel in key markets. (See also: Intel's 'Biggest Risk' Remains Unresolved.)

Technical chart showing the performance of Advanced Micro Devices, Inc. (AMD) stock

From a technical standpoint, AMD stock broke out to fresh all-time highs last week, briefly surpassing $20.00 per share. The stock started to show signs of topping out in recent sessions with doji star patterns that could suggest downside ahead. The relative strength index (RSI) also reached overbought levels of 74.71, but the moving average convergence divergence (MACD) experienced a bullish crossover. These technical indicators suggest that there could be some consolidation before a further rally higher as traders lock in profits.

[Learn more about using supplemental technical indicators like the RSI and MACD to guide your trading strategy in Chapter 4 of the Technical Analysis course on the Investopedia Academy.]

Traders should watch for some consolidation above R1 support at $18.84 before a significant move higher. If the stock breaks down below these levels, traders could see a move to retest trendline and R1 support at around $16.91. The long-term trend remains bullish, however, as AMD looks to continue to capture market share in key markets, particularly following Intel's delays. (For more, see: AMD May See Massive Volatility After Earnings.)

Chart courtesy of The author holds no position in the stock(s) mentioned except through passively managed index funds.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.