New AMD Price Target After U.S.-China Deal Surprise
A $6 billion buyback and a Saudi AI deal are boosting Advanced Micro; how high will the stock rise?
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Advanced Micro Devices AMD shares ripped higher by 4.6% on Wednesday, as positive fundamental news combined with a bullish technical breakout to push the stock to a three-month high.
Just last week, I laid out my strategy for trading Advanced Micro Devices. The plan was to go long on a break out of a bear channel that had held AMD down since September of last year.
Trigger Point Hit
On Monday, AMD finally closed above our trigger point of $105. In the week that has passed since the article was written, AMD has gained over 15%.
The trade was a reaction to Wall Street’s "meh" response to AMD’s stellar May 6 earnings report. In the aftermath of that report, AMD investors chose to focus on potential write downs due to tariffs, which were anticipated to total between $1.5 and $1.8 billion.
Trade Talks Were a Big Positive
By focusing on the negative, investors were ignoring the possibility of progress in trade talks between the U.S. and China. Since then, the U.S. and China have lowered their tariffs significantly, although future trade negotiations between the two countries remain uncertain.
On Wednesday, AMD announced that its board of directors approved $6 billion worth of share buybacks. The Santa Clara-based chip manufacturer currently has a market capitalization of $191 billion.
AMD is also the beneficiary of a potential $10 billion deal with a Saudi AI company. The strategic partnership with Humain, an AI startup that was recently launched by Saudi Arabia’s sovereign wealth fund, came as a flood of announcements involving U.S. tech giants and Middle Eastern investors hit the newswire.
AMD's New Price Target
Where will shares of AMD go from here? Let’s go to the chart to find out.
Since reaching its year to date low on April 8 (L), AMD has formed a higher low (HL) and a higher high (HH). This is the first indication that the stock is now in a bullish trend.
AMD’s next major resistance is its 200-day moving average (red line), currently located near $127. Based on the current momentum of both the stock and the overall market, AMD should clear that hurdle.
I’m looking for AMD to continue rising until it fills a gap created after an earnings report that occurred six months ago (point A). It’s a large gap that occurred on heavy volume, giving it added significance.
If that gap is filled, AMD will hit my new price target of $159. That price is the low point of the October 29 candle (point A), and represents a 35% profit from Wednesday’s closing price.
At the time of publication, Ponsi was long AMD.
