Resistance Levels Where AMD Could Fail in a Bear Rally
تم تحديثه
Primary Chart: Bollinger Bands (Yellow Shaded Volatility Channel) with Fibonacci Levels, Downward TL and VWAPs
1. As discussed earlier this month, AMD remains in a severe downtrend at the primary degree of trend. This means that the path of least resistance on higher time frames remains lower unless and until AMD can do a substantial amount of price work and recover into the mid 80s (the area of the downward trendline shown on the Primary Chart) and preferably the $100.60 level (the .50 retracement of the 2020-2022 rally).
Supplementary Chart A: AMD's Linear Regression Channel Reflects Severe Downtrend
2. In every trend, however, corrective retracements and mean reversions will occur. In a downtrend, market participants commonly attempt to pick bottoms especially in former market leaders and darlings—and when this bottom-picking is combined with heavy short positioning that requires covering when major downside moves exhaust, ferocious bear rallies ensue. On October 11, 2022, SquishTrade prepared the following chart showing some of the powerful bear rallies that have occurred since November 30, 2022 (all-time high date):
Supplementary Chart B: Percentage Gains for Bear Rallies in AMD Since All-Time High
3. The VWAP anchored to the all-time high on November 30, 2022, shown on the Primary Chart, reveals that the downtrend at the primary degree of trend remains in effect. The lower highs and lower lows on daily and weekly charts support this conclusion, and the downward trendline—also shown on the Primary Chart in orange—has not been broken. Price remains significantly below both the orange downward TL and the all-time-high VWAP, showing the profound weakness in this former market leader.
4. Price has even fallen beneath the April 2018 anchored VWAP (shown in red on the Primary Chart above) having a price value of $61.95 on October 20, 2022. AMD's rapid decline since August 4, 2022 peaks appears to have stalled just after breaking below this VWAP. This 4.5 year VWAP provides strong near-term resistance at $61.95. This level of interest should be monitored during any bear rally and on any subsequent decline. Price may rally and whipsaw above it during a mean reversion only to fail and slice back below it.
5. Price has fallen beneath the .786 and .618 retracements of the entire rally from the Covid 2020 lows. These levels are at $64.08 and $85.54 respectively. This is significant because it reflects the strength of this downtrend. Any bear rally will meet strong resistance when rising back to these levels. Before considering these levels as resistance however, price must first break above the April 2018 VWAP (about $61-$62), and the 21-day EMA at about $63.31 as of October 20, 2022. Until the 21-day EMA and the April 2018 VWAP are reclaimed ($61-$63 approximately, the higher retracement levels remain irrelevant.
6. Some evidence of downside exhaustion appears on AMD's charts. These suggest that a short-covering and FOMO-driven rally may occur in the coming weeks between now and year end. SquishTrade hinted at this possibility recently with the following chart, showing how AMD was approaching the bottom of its downtrend channel:
Supplementary Chart C: October 11, 2022, Post Showing Higher Risk For Shorts Near Downtrend-Channel Support
7. On AMD's daily chart, RSI now shows a positive divergence despite price making lower lows. This is further evidence that shorts should be cautious and wary of a bear rally or, at a minimum, choppy action over the next few weeks.
Supplementary Chart D: RSI Positive Divergence on Daily Chart
8. The Bollinger Bands also suggest that the downward price move from August 4, 2022, swing highs may be nearing exhaustion. Note how the bands (set at two standard deviations) are contracting now, which suggests either chop or mean reversion in the coming days or weeks. The %B indicator in the subgraph also shows weakening downside price action. As price made lower lows over the past two months, the %B indicator made higher lows. This reflects that price moves were less powerful even though they made lower lows on the main price chart—when price cannot pierce the bands as deeply with each subsequent low, and when price eventually cannot even tag the band with a new low in October 2022, this shows price may be ready to consolidate or mean revert.
Supplementary Chart E: Bollinger Bands Signaling Exhaustion and Temporary Pause in Downtrend
9. For anyone trying to catch the bear rallies, watch out for false breakouts above resistance as discussed in the following linked post, showing a false breakout this month above a shorter-term trendline. When the primary trend is down, countertrend moves can be challenging and tricky, so tight stops make sense.
Supplementary Chart F: False Breakout above Resistance—Example from October 6, 2022
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Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
1. As discussed earlier this month, AMD remains in a severe downtrend at the primary degree of trend. This means that the path of least resistance on higher time frames remains lower unless and until AMD can do a substantial amount of price work and recover into the mid 80s (the area of the downward trendline shown on the Primary Chart) and preferably the $100.60 level (the .50 retracement of the 2020-2022 rally).
Supplementary Chart A: AMD's Linear Regression Channel Reflects Severe Downtrend
2. In every trend, however, corrective retracements and mean reversions will occur. In a downtrend, market participants commonly attempt to pick bottoms especially in former market leaders and darlings—and when this bottom-picking is combined with heavy short positioning that requires covering when major downside moves exhaust, ferocious bear rallies ensue. On October 11, 2022, SquishTrade prepared the following chart showing some of the powerful bear rallies that have occurred since November 30, 2022 (all-time high date):
Supplementary Chart B: Percentage Gains for Bear Rallies in AMD Since All-Time High
3. The VWAP anchored to the all-time high on November 30, 2022, shown on the Primary Chart, reveals that the downtrend at the primary degree of trend remains in effect. The lower highs and lower lows on daily and weekly charts support this conclusion, and the downward trendline—also shown on the Primary Chart in orange—has not been broken. Price remains significantly below both the orange downward TL and the all-time-high VWAP, showing the profound weakness in this former market leader.
4. Price has even fallen beneath the April 2018 anchored VWAP (shown in red on the Primary Chart above) having a price value of $61.95 on October 20, 2022. AMD's rapid decline since August 4, 2022 peaks appears to have stalled just after breaking below this VWAP. This 4.5 year VWAP provides strong near-term resistance at $61.95. This level of interest should be monitored during any bear rally and on any subsequent decline. Price may rally and whipsaw above it during a mean reversion only to fail and slice back below it.
5. Price has fallen beneath the .786 and .618 retracements of the entire rally from the Covid 2020 lows. These levels are at $64.08 and $85.54 respectively. This is significant because it reflects the strength of this downtrend. Any bear rally will meet strong resistance when rising back to these levels. Before considering these levels as resistance however, price must first break above the April 2018 VWAP (about $61-$62), and the 21-day EMA at about $63.31 as of October 20, 2022. Until the 21-day EMA and the April 2018 VWAP are reclaimed ($61-$63 approximately, the higher retracement levels remain irrelevant.
6. Some evidence of downside exhaustion appears on AMD's charts. These suggest that a short-covering and FOMO-driven rally may occur in the coming weeks between now and year end. SquishTrade hinted at this possibility recently with the following chart, showing how AMD was approaching the bottom of its downtrend channel:
Supplementary Chart C: October 11, 2022, Post Showing Higher Risk For Shorts Near Downtrend-Channel Support
7. On AMD's daily chart, RSI now shows a positive divergence despite price making lower lows. This is further evidence that shorts should be cautious and wary of a bear rally or, at a minimum, choppy action over the next few weeks.
Supplementary Chart D: RSI Positive Divergence on Daily Chart
8. The Bollinger Bands also suggest that the downward price move from August 4, 2022, swing highs may be nearing exhaustion. Note how the bands (set at two standard deviations) are contracting now, which suggests either chop or mean reversion in the coming days or weeks. The %B indicator in the subgraph also shows weakening downside price action. As price made lower lows over the past two months, the %B indicator made higher lows. This reflects that price moves were less powerful even though they made lower lows on the main price chart—when price cannot pierce the bands as deeply with each subsequent low, and when price eventually cannot even tag the band with a new low in October 2022, this shows price may be ready to consolidate or mean revert.
Supplementary Chart E: Bollinger Bands Signaling Exhaustion and Temporary Pause in Downtrend
9. For anyone trying to catch the bear rallies, watch out for false breakouts above resistance as discussed in the following linked post, showing a false breakout this month above a shorter-term trendline. When the primary trend is down, countertrend moves can be challenging and tricky, so tight stops make sense.
Supplementary Chart F: False Breakout above Resistance—Example from October 6, 2022
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
ملاحظة
Could AMD's bounce look any weaker than it is? SPX was up over 1.1% today and NDX was up 1.06%. AMD was down -.20%. The 2018 anchored VWAP shown on the Primary Chart above (red) at 61-62 has not even been approached, much less tested on this bounce off October lows.ملاحظة
AMD's bounce is now flirting with the first major level -- the VWAP anchored to April 2018 lows around 61.94.AMD broke above the short-term downward trendline (and out of the price channel defined by that trendline. But it's still looking a bit weaker than the rest of the market generally.
Watching this 2018 Anchored VWAP at $61.95. This VWAP, interestingly, aligns with the measured move target of $61.63-$63.24. If AMD is to reverse lower, this range of $61.63-$63.24 makes sense. But markets don't always like to make sense, as this year's sharp rallies and declines have shown.
ملاحظة
And the 21-day EMA at $62.33 falls within in the same area as the measured move target of $61.63 to $63.24ملاحظة
It's important to remember just how far bear rallies can run. This is why my original post contained the following chart (copied and pasted again below):ملاحظة
With earnings being reported after hours, AMD should be expected to move in either direction substantially.AMD continues to struggle at the 2018 VWAP (shown in red on the Primary Chart). On Friday last week (10/28), AMD had a weekly and daily close above the 2018 VWAP. Today, price fell right back below that 2018 VWAP, which now shows a value of $61.93.
For now, AMD remains in a tricky and uncertain spot—not a surprise given that earnings reactions are random and uncertain, especially in this market (after earnings, several FAANG stocks were hard hit last week and a some rallied unexpectedly).
Even the daily candle (so far) reflects this uncertainty:
AMD's short-term uptrend remains valid until broken in either direction, as price remains in the center of the parallel channel off the YTD lows (see below). Further, AMD remains above the 8-day EMA and below the 21-day EMA. AMD rose above the 21-day EMA last week, but failed back below it today.
ملاحظة
AMD reported results after the close today. Guidance was disappointing. EPS was .67/share vs. .68/share expected, so a small miss there.
Revenue missed as well—5.57 billion vs. 5.62 billion expected, a miss of about $50 million.
Although revenue was up 29% YoY, net income was down -93% due to an acquisition.
Full year revenue guidance was lowered by about 3 billion from where it was forecasted in August 2022 according to financial media. In other words, in August 2022, full year revenue was forecasted at $26.3 b, but now it is forecasted at $23.5 b.
AMD also noted weakening PC sales this fall. This is consistent with broader economic signs (yield curve inversions, PMIs falling, etc.) of a growth slowdown / recession.
Why is the stock up after hours? AMD made comments about its chip server business growing in coming quarters. It seems that investors in this season are looking for any reason whatsoever to be bullish. This makes me wonder if something totally standard that the Fed Chair says tomorrow will be interpreted as dovish to support a few more days of rallying, similar to July / August bear rally.
ملاحظة
After struggling with its 2018 VWAP (yellow), AMD has now reclaimed it. Next major resistance levels are a huge gap from $64-$68 and a Fibonacci level at $69/$70 (depending on log / linear charting).But with CPI on Thursday (and previous market reactions to CPI), AMD's rally should be viewed as a tenuous event that could fail at any time. It could fail here, and it could fail higher at $70. Be careful and prepared in this volatile market!
أغلقت الصفقة: تم الوصول للهدف
1. On Oct. 20, 2022, AMD closed at 57.77 when ST wrote that "some evidence of downside exhaustion appears on AMD's charts," and forecasted that "such evidence "suggests that a short-covering and FOMO-driven rally may occur in the coming weeks between now and year end." 2. The technical basis for this call was positive / bullish divergences in RSI and %B (a Bollinger Band derivative indicator), and the fact that AMD reached the lower support (return line) of a downtrend channel. ST reasoned that "in every trend, however, corrective retracements and mean reversions will occur. In a downtrend, market participants commonly attempt to pick bottoms especially in former market leaders and darlings—and when this bottom-picking is combined with heavy short positioning that requires covering when major downside moves exhaust, ferocious bear rallies ensue."
3. Since this forecast in mid-October, AMD has rallied all the way up to its downward TL from all-time highs at $79.16. So the forecast worked out, albeit the rally went further than expected (as usual). Now the downtrend will either resume or be broken—AMD is at is moment of truth. Odds favor the downtrend resuming.
4. If readers are interested, let ST know whether to post more updates if confirmation back to the downside occurs.
5. Finally, one more upside resistance identified in the main post above is a long-term .618 retracement at $85 (the .618 retracement of the entire rally from the Covid 2020 lows). With price having reached $79.16, this major resistance is only a few dollars above the high, and it remains strong resistance. (It's doubtful that AMD will climb above $85 in the short-term, but anything can happen in these volatile times.)
SquishTrade
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