Stock of the day: AMD

After days of a sharp reversal, markets are currently experiencing a flat bearish correction. At least it still seems like a correction, not a start of a new bearish trend. In today’s analysis, we’re looking at AMD, which is in a very interesting place, just a few steps away from a major buy signal.

On the chart, you can see a big head and shoulders pattern (yellow). The formation ended with a breakout of the neckline, which in theory gave us a sell signal. Traders did not follow that with a great momentum though. The price went slightly lower but we cannot say that it was something spectacular. Instead, AMD created a flag (red) and managed to climb back above the neckline (blue).

A comeback above the neckline could be considered as a strong buy signal but I am still not convinced. What would convince me, would be a breakout of the mid-term down trendline (black), the one connecting the top of the head and the right shoulder. The price breaking that and effectively escaping out of the flag, would definitely be a strong buy signal. And that is this small step that is needed here, that we mentioned at the very beginning.

A positive sentiment is more probable but it will be cancelled, when the price will break the lower line of the flag. There’s a chance for that exist but is not really high at the moment.