How To Trade AMD After It Gaps Below Its Annual Value Level

Advanced Micro Devices

AMD
declined from $164.46 on November 30, 2021, to as low as $99.35 on January 28, 2022. The stock quickly rebounded to $132.96 on February 9, 2022. Shares of AMD then traded sideways to down with the low end of the range holding on March 8. This level failed to hold on April 11.

From the beginning of the year, I showed an annual value level at $100.79, which held on January 28 with a low of $99.35. After a rebound to $132.96 on February 9, another wave down held the annual value level on March 8 with a low of $100.08.

After another rally to $125.67 on March 30, the stock dropped again. This time the annual level at $100.79 held again at the April 8 low. Then came the problem! Monday’s open on April 11 was a gap below this important level. When this happens, I recommend a sell stop to lock in the loss from $100.79 at $97.79.

The charts show why to take this quick loss!

The Daily Chart for Advanced Micro Devices

AMD had a false death cross on April 22, 2021 when the 50-day simple moving average crossed below the 200-day simple moving average. A sell at this point was at $79.06. When it appeared that this trade would not be profitable, an appropriate buy level was the 200-day SMA at $84.75 on July 19, 2021.

On July 29 there was a golden cross where a buy was feasible at $102.95. This led to the November 30, 2021, high of $164.45. As 2022 began there was a quarterly pivot at $146.57 that was a sell level when it failed to hold on January 4.

There were buying opportunities at the annual pivot at $100.79 on January 28 and March 8. The annual pivot failed to hold on April 11. A warning not to buy there was the death cross that formed on March 28. So, the story was not to buy or use the sell stop.

The 50-day and 200-day simple moving averages are $114.21 and $117.74, respectively, which is a signal to sell strength.

The Weekly Chart for Advanced Micro Devices

The weekly chart for AMD is negative but oversold. The stock is below its five-week modified moving average at $109.22. The stock is well above its 200-week simple moving average or “reversion to the mean” at $63.17. The 12x3x3 weekly slow stochastic reading is declining at 19.00. This reading is below 20.00 so the stock is oversold. Remember that stochastic readings scale between 00.00 and 100.00 with readings above 80.00 overbought and readings below 20.00 oversold.

Trading Strategy: I do not have a buy level for Advanced Micro Devices. Reduce holdings on strength to its 200-day simple moving average at $117.74.