The advanced advance of Advanced Micro Devices (NASDAQ 🙂 reached the highest level since 2006 two weeks ago, but is this the time to buy? The technical graphs claim that this new high should be interpreted as a bearish signal, because demand can dry up.
The chip maker is scheduled to release today after the closing bell. It has made a tremendous turnaround since the bottom of 2016, when CEO Lisa Su led the company to beat competitor Intel (NASDAQ :).
However, sales have been delayed in the last three years, with AMD & # 39; s first YoY revenue in nearly two years. Semiconductors are faced with a cyclical decline exacerbated by the trade war between the US and China. A study of the balance between supply and demand claims that the quality of demand is weakening.
At first glance, a record high is a bullish sign, because there is sufficient demand to be willing to raise bids to bring down sellers. However, a deeper study suggests that this rising demand could rot from within.
Price Resistance
First, the new high on July 16 failed to make a profit and close lower. Second, it confirmed a resistance by the previous high of June 10, when it developed a shooting star, followed by a 13% drop in just two weeks. Thirdly, it again confirmed the same line of resistance when forming yet another shooting star Friday. Fourth, a longer view reveals that this resistance dates back to the high point of September 2018. Finally, the price is approaching major highs that were recorded in 2006 and reach their peak during the 2000 dotcom bubble. Investors have a lot of psychological resistance to overcome on this. levels.
Price trend already weakened
The MACD formula compares two moving averages of different periods to the strength of a current price over a longer period. It is therefore remarkable that the short MA of the MACD slid twice under the long MA after each of the new highs in June and July, while he did not even bother to rise higher between the third high last Friday.
Weakening Momentum
The RSI also offers consecutive negative differences, as well as the momentum weekend with each price increase.
Buyers fall out
The volume has been declining since April in a negative divergence from the price, even as it reached the highest levels since 2006. The volume has even fallen since August 2018, when the price more than halved in just 10 weeks. This indicates that volume does not support the miraculous recovery and suggests that while some buyers are still increasing bids, most buyers have steadily dropped out of the race.
Summary
The trend is still in the short, medium and long term. The multiple resistance to the price, together with the weakening momentum and the decreasing volume, however, dramatically increases the potential for a peak.
Trading Strategies
Conservative traders can wait to go long until after a new high that seems to be sustained, followed by a return movement that shows support.
Moderate traders can risk a long position with a withdrawal in the direction of the upward trend above $ 30. short, provided they have a classified plan and understand the risks, not just the potential reward .
Trading example
Input: $ 34 Stop loss: $ 35, above July High risk: $ 1 Target: $ 31 Reward: $ 3 Risk reward ratio: 1: 3
