Advanced Micro Devices, Inc. (AMD) shares plummeted nearly 11% in after-hours trading on Tuesday after the company reported third quarter financial results. Third quarter revenue rose 25.2% to $1.64 billion – beating consensus estimates by $130 million – and earnings per share of 10 cents beat consensus estimates by two cents per share. However, the company expects fourth quarter revenue to fall about 15% sequentially.

The market has high expectations for the chip maker, with shares about 120% higher over the past 52 weeks, but analysts aren't so sure. Citi Research reiterated its Sell rating on the stock with a $5.00 per share price target earlier this week, saying that Intel Corporation's (INTC) new CPUs have extended their performance lead over AMD, which could hurt its market share. The analyst forecast that AMD's market share would fall by 7.2% during the third quarter. (See also: AMD Traders Make Big Bets in Quest for Fast Gains.)

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

From a technical standpoint, the stock appears set to break down from an ascending triangle pattern following the bearish earnings guidance. The relative strength index (RSI) appears slightly overbought at 63.89, while the moving average convergence divergence (MACD) could see a near-term bearish crossover. Traders should maintain a short-term bearish bias and a medium-term bullish bias given the third quarter results and existing price trend.

Traders should watch for a breakdown from the ascending triangle to the pivot point and 50-day moving average at around $13.00. If prices move below these levels, the next major support lies at around $12.00 or S1 support at $11.78. A close above $13.00 during Wednesday's session could create a base for consolidation before a resumed uptrend or longer-term reversal after the market digests the third quarter results. (For more, see: Top 3 Shareholders of AMD.)

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

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