To The Moon

What AMD's Chart Says Ahead of This Month's Earnings Report

$Advanced Micro Devices(AMD)$   has gained nearly 40% so far this year, but its performance has actually lagged that of rival high-end chip designers like Nvidia and Broadcom. What does AMD's technical and fundamental analysis say might happen next?

Let's look:

Advanced Micro Devices' Fundamental Analysis

AMD rose 40.5% year to date as of Thursday's close, but has only gained about 6% over the past 12 months.

That trails industry leader Nvidia's one-year performance by a mile. $NVIDIA(NVDA)$   hit a new all-time high Thursday – up 40.7% year to date, but nearly 60% over 12 months.

$Broadcom (AVGO.US)$ is doing even better – ahead about 45% YTD and around 100% over 12 months – while even $Marvell Technology (MRVL.US)$ (arguably a distant competitor in the space) has a better five-year performance than AMD.

AMD is supposedly Nvidia's closest competitor, focusing on designing chips for artificial intelligence as AI moves from large language models and chatbots to actual generative and agentic uses.

If there's going to be future monetization of AI on the Software as a Service side (SaaS), that's where we'll see it – and that's where AMD CEO Lisa Su is focusing. 

Advanced Micro Devices is set to report Q3 results in late October, with the Street currently looking for $1.17 in adjusted earnings per share on roughly $8.7 billion of revenue.

That would represent a 27.2% year-over-year gain from the $0.92 in adjusted EPS that the chip giant reported in Q3 2024. Meanwhile, revenue gains would total about 28% from the year-ago period's $6.8 billion.

Of the 37 sell-side analysts that I know of that cover AMD, 24 have revised their earnings estimates higher since the current quarter began, while eight have lowered their forecasts and five have left their estimates unrevised. 

Advanced Micro Devices' Technical Analysis

Next, let's check out AMD's six-month chart as of Tuesday afternoon:

We will see that AMD rallied from early April into mid-August on a series of consecutive "bull-flag" patterns of trend continuance, as marked with purple diagonal lines above.

But things get interesting after that as the stock sold off from mid-August into mid-September.

First, the stock's movement firmed up a so-called "falling-wedge" pattern of bullish reversal, as marked with a red box above.

But now that AMD's reversal has actually begun, the stock appears to be developing what's known as a "cup" pattern, marked with a black curved line at the chart's right. This pattern is also technically bullish. 

Many people are familiar with what's called a "cup-with-handle" pattern, but cups don't have to add a handle.

Until they do, the pivot remains the cup's left-side apex. Once a handle is added, the pivot moves over to the cup's right side.

But for now, the pivot created by the pattern above stands at $187 vs. the $169.73 that AMD closed at Thursday.

Now, there's also another pivot of sorts to the stock in the form of AMD's 50-day Simple Moving Average (or "SMA," marked with a blue line above at the $165 level).

In short, AMD has two upside pivots in the chart above -- and one just might trigger the other if it's first triggered itself. How interesting is that? 

That said, AMD's secondary technical indicators aren't really buying the above bullish story just yet.

For example, the stock's Relative Strength Index (the gray line at the chart's top) is neutral.

Similarly, the stock's daily Moving Average Convergence Divergence indicator (or "MACD," marked with black and gold lines and blue bars at the chart's bottom) is starting to perk up, but I wouldn't get excited just yet.

Within the MACD, the histogram of the 9-day Exponential Moving Average (or "EMA," denoted by blue bars) is above zero. That's a short-term bullish technical sign.

Meanwhile, the 12-day EMA (the black line) is above the 26-day EMA (the gold line), which is also short- to medium-term bullish. However, both of those lines are still below zero, which is short- to medium-term bearish. 

An Options Option

Options traders who own or are interested in buying AMD shares here might choose to also sell covered calls while also selling puts to essentially purchase downside protection for free, although they'd limit their potential profit. Here is an example:

-- Purchase 100 shares of AMD at or close to $170.

-- Sell one Oct. 31 AMD call with a $175 strike price for about $7.90.

-- Purchase one Oct. 31 AMD $167.50 put for roughly $7.70.

The trader in the set-up above would be essentially getting long AMD shares because he or she sees a positive set-up.

That said, in order to manage the risk through AMD's upcoming earnings, the trader would sell a call for about enough to limit the downside risk through the earning release date. (Of course, this will also limit profitability through that date as well.)

Should the trader's AMD stock get called away at $175, that would still represent about a 2.9% profit.

But the trader isn't hoping to get the stock called away -- just trying to protect against a poor market response to either AMD's upcoming Q3 earnings or any forward guidance issued.

Should the trader be forced to put the shares to someone else at $167.50, that would represent just a 1.5% loss.

Disclaimer: The information provided is NOT financial advice. I am not a financial adviser, accountant or the like. This information is purely from my own due diligence and an expression of my thoughts, my opinions based on my personal experiences, and the way I transact.

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