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How To Trade Momentum Stock Advanced Micro Devices

Advanced Micro Devices
AMD
became a momentum stock when shares gapped above its 200-day simple moving average (SMA) at $83.80 on June 24. This made the 200-day SMA the level at which to buy on weakness. This was tested at $84.75 on July 19. In mid-July several Wall Street analysts raised their price targets for AMD and this proved to be a great call.

AMD has always been a popular trading stock and in recent history has been outperforming Intel
INTC
by significant margin. This morning the stock spiked higher trading above $118.00 as of 10:00 AM.

My daily and weekly charts show several buying opportunities since March 2020.

The Daily Chart for AMD

Not shown on the daily chart for AMD is the buying opportunity that occurred at the test of its 200-day simple moving average at $37.66 back on March 18, 2020.

The chart shows the price bars going back 52 weeks. With the 50-day simple moving average above the 200-day SMA a year ago, AMD was above a golden cross. This meant that the stock should be bought on weakness to this important moving average. The 200-day SMA was tested at $78.20 on March 4. The close at $78.55 on May 3 was below the 50-day SMA which prompted a sell stop.

This corresponds to the end of the golden cross. At this time, you must look at a trading range. In round numbers this range is between $75 and $95.

The next buying opportunity is the breakout above the 200-day SMA on June 24. AMD closed at $86.10 that day. With so many bullish analysts in June and July, the next buy level was the 200-day SMA that was tested at $84.75 on July 19. This is when momentum took over as the stock climbed higher almost every day including today.

Beginning in July the price target was the quarterly risky level at $105.85, which was tested on July 30. Traders who did not book profits at this level should consider a sell stop on a close below this level.

The Weekly Chart for AMD

The weekly chart for AMD is positive but overbought with the stock above its five-week modified moving average at $96.45. It’s well above its 200-week simple moving average or reversion to the mean at $43.68. The 12x3x3 weekly slow stochastic reading is rising at 82.14. Keep an eye on this reading as a rise above 90.00 puts AMD in an inflating parabolic bubble formation. Each week the five-week MMA will be rising. As soon as it gets above $105.85 use a weekly close below the five-week MMA at your sell stop.

Trading Strategy: Buy AMD on weakness to the quarterly pivot at $105.85 and add to this position on weakness to the monthly value level at $86.98. Reduce holdings on a sell stop below the quarterly pivot at $105.85 or below the 5-week modified moving average as it rises each week from $96.45.

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