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Asset Watch
Tuesday, December 3, 2024
With the ‘Trump Trade’ supporting cyclicals and America-centric assets, the AI winners have lost their lustre. However, as the economic impact of AI is likely to bolster global productivity and potential GDP growth, AMD’s bull market could have plenty of room to run.
But should you position for further upside before the enthusiasm returns?
On Nov. 21, Indeed reported that “Generative AI (GenAI) usage in global workplaces has surged over the past year.”
More specifically, “The share of job postings mentioning GenAI or related terms has skyrocketed over the past year, up 3.5 times in the United States and even faster in other countries.”
Adding, “Data analytics consistently ranks as the sector with the highest GenAI postings share across all nine analysed countries. Scientific research and software development also rank highly in eight of these countries.”
So, while AMD’s stock price has suffered, the fundamentals driving its long-term performance remain robust.
Despite the recent correction, AMD remains in a long-term uptrend with higher lows realised throughout the current bull market. Moreover, price support and the 100-week moving average (the yellow line) align near $131, and the latter has been a key source of support during the last two sell-offs.
Another ally for the bulls is the recent behaviour of AMD’s weekly RSI (the blue line at the bottom). If you analyse the recent lows, you can see that the stock has bottomed with the RSI in the 40-45 zone. Plus, the last two major lows occurred with the RSI in this range and the stock reaching its 100-week MA.
Consequently, with a similar setup now present, history suggests a favourable risk-reward of owning AMD over the next few months.
Depending on your risk tolerance, aggressive traders may prefer to enter a position now and play for a rally back toward $170. Conversely, a more conservative approach is to wait for the stock to retest $131 and make your move if the pullback occurs.
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