Advanced Micro Devices (AMD) more than doubled since last November.
However, March has not been a kind month so far for this uptrending stock.
Like the market itself, AMD pulled back to a key support level from negative divergences.
Let’s plot this development and plan what’s next for traders:
We saw a breakout on high volume and momentum in late November 2016, setting up the stage for a rally.
Buyers didn’t disappoint, as shares traveled from the $6.50 level to the current high into $15.50 per share.
However, despite stellar and ideal pullbacks (see our “Perfect Pullback” series), the gas ran out on AMD as sellers struck, collapsing the price back toward the $12.00 overlapping target level.
How did we get this target? It’s the overlap of the prior price high (and swing low from February) with the rising 50 day EMA and lower Bollinger Band.
This was a target for aggressive traders to play TOWARD (on a departure from the upper Bollinger Band).
NOW, we have a situation where we’ll trade the departure AWAY FROM this target.
We’re seeing a mid-day bullish reversal off the $12.25 level and if this continues with a breakout above $13.50, we could see a return to the high (bullish pathway).
If instead sellers continue their campaign, we’ll have an aggressive short-sale beneath $12.00 toward $9.50.
Either way, follow this popular stock and see what happens next (and learn the lesson from this snap-back).
Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.
Corey Rosenbloom, CMT
Follow Corey on Twitter: http://twitter.com/afraidtotrade