Advanced Micro Devices, Inc. (AMD) competed head-to-head with Dow component Intel, Corp. (INTC) for more than two decades, finally yielding to the larger rival’s technical and sales dominance, plunging to an all-time low in early 2009. The stock failed to bounce with broad tech benchmarks into this decade’s historic bull market, drifting near deep downtrend lows for more than seven years.
The perennial laggard awoke from the dead in 2016 after revealing new chip architecture that potentially matches or exceeds INTC performance at a lower cost. It completed an 8-year triple bottom pattern and took off in the strongest buying surge of the decade, startling long-time skeptics as a top ten tech performer. The rally has stalled since February 2017, yielding to profit-taking while establishing this week’s earnings confessional as a major reality check on the company’s short and long-term financial outlooks.
AMD Long-Term Chart (1994–2017)
The stock fell to a multi-year low in 1990 while personal computer sales dwindled in a harsh operating environment that eased several years later with the introduction of a killer app called the World Wide Web. It gained ground in a choppy uptrend into the 1997 high at $24.25, gave up those gains into 1998 and took off in a vertical trend advance that coincided with the flood of high-tech and Internet IPOs during the Dot-com bubble.
It posted an all-time high at $48.50 in June 2000 and rolled over in an ugly decline that dropped the stock to an 11-year low in October 2002. The subsequent recovery wave unfolded at the same trajectory as the prior decade’s vertical advance but came up short, topping out six points under the 2000 high in 2006. That peak marked the highest high in the last 11-years, giving way to a downtrend that accelerated during the 2008 economic collapse.
A 2009 test at the deep 1990 low found critical support, but the bounce into 2010 highlighted growing structural weakness, failing to hold double digits after reaching $10.24 in the first half of the year. Two tests at that resistance level into 2012 failed as well, giving way to a selloff in the bear market low, followed by three years of dead action ahead of the 2016 resurrection.
AMD Short-Term Chart (2015–2017)
The stock hit bottom in July 2015 and tested that level in January 2016, completing a double bottom ahead of a strong rally wave that lifted above 3-year resistance at $4.50 (blue line) in June. It continued to gain ground within a rising channel into the first quarter of 2017, topping out at $15.55 and dropping into a sideways pattern that’s still in play two months later. The long-term bullish tone will deteriorate if price fails to hold range support and the 50-day EMA between $12.50 and $13.00.
On Balance Volume (OBV) surged off a multi-year low at the start of 2016 in support of the new uptrend, finally peaking in the first quarter of 2017. Four months of whipsaws highlight growing conflict between bull and bears, with the indicator now grinding sideways in an uneasy equilibrium. This week’s earnings report is likely to have the final say on this testing process lifting the stock to a new high and dropping it into a larger scale correction.
The Bottom Line
AMD led the broad tech sector in 2016, charging higher in a powerful trend advance that lifted the stock price more than fivefold into year’s end. It eased into a holding pattern in February 2017, while investors, momentum players and market timers await metrics that confirm the company’s innovative product line can compete aggressively with much larger rival Intel.
<Disclosure: the author held no positions in aforementioned stocks at the time of publication.>