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Asset Watch

Should you be careful with AMD?

Thursday, January 18, 2024

Risk-off sentiment dominated the financial markets on Jan. 16, as rising Treasury yields and a stronger U.S. dollar occurred alongside lower stock prices. But with AMD surging by more than 8%, upgrades from KeyBanc and Barclays helped boost the chipmaker. The latter increased its price target to $200 and wrote:
“With supply constraints, customers are often using the entire NVDA platform in order to get priority shipments of accelerators. [However, 2024 is] the year AI begins to open up.”
While supply issues allowed NVIDIA to dominate the AI chip market in 2023, AMD’s increased production should help it play catch-up in 2024.

Yet, with the stock confronting an ominous technical backdrop, is caution warranted in the weeks ahead?

AMD ended the Jan. 16 session near the record high set in 2021, which means it’s up against resistance. The stock also has run away from its 50-week moving average, and the white arrows show how the last two times AMD went vertical and left its 50-week MA in the dust, substantial pullbacks followed. And as another decoupling presents itself on the right side of the chart, the risk-reward seems unattractive.

On top of that, AMD’s weekly RSI is diverging. When the stock hit its May 2023 highs near $130, its weekly RSI approached 78. The stock is now closer to $160, while its weekly RSI is near 73. This signals decelerating momentum, which often precedes pullbacks.

So, should you avoid AMD in the short term, or can the bull run continue?


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