After a Fresh Surge, This Tech Stock Is Setting Up for a Fall

[Trading With Larry Benedict]( After a Fresh Surge, This Tech Stock Is Setting Up for a Fall By Larry Benedict, editor, Trading With Larry Benedict The first half of 2023 was a great boon for Advanced Micro Devices (AMD) investors. AMD rallied beginning in early January. And the chipmaker’s uptrend accelerated in May as the market bid up stocks that were set to benefit from the AI boom. In a little over a month, AMD gained a massive 61%. And it saw its stock price more than double from the start of the year. But it had overshot to the upside, so AMD reversed in mid-June as buying momentum waned. We last [checked in on AMD]( in late August (red arrow in the chart below). At that time, it was drifting lower and stuck in a malaise that carried right through to late October. But with AMD ripping over 32% higher in just the past month, let’s see what’s in store. 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Advanced Micro Devices (AMD) [Image] Source: eSignal Other than a brief dip from April into May, the relative strength index (RSI) tracked bullishly in its upper band (above the green line). This showed AMD’s positive momentum throughout its uptrend. Yet a reversal pattern caused AMD to peak and turn down from its highs in mid-June. While AMD was making higher highs (left upper orange line), the RSI was trending lower, making lower highs (left lower orange line). When the RSI falls like this, it will eventually drag the stock price lower. And that is what we saw… After its initial pullback, AMD continued to drift lower. The RSI couldn’t hold support and fell steadily into its lower band. Adding to the bearish sentiment, the 10-day MA (red line) crossed beneath the 50-day MA with both MAs tracking lower. Then AMD tried to rally in September, but that turned out to be a false move. Take another look: Advanced Micro Devices (AMD) [Image] Source: eSignal In November, the RSI rallied from oversold territory. And when the RSI broke through resistance (green line), AMD’s current rally was able to get underway. AMD beating forecasted Q3 earnings led to that initial surge on November 1. It continued to rally with the 10-day MA breaking strongly above the 50-day MA. But AMD’s recent surge put it back into overbought territory. So what can we expect from here? Reversal Pattern Repeats On the chart, you can see that AMD has continued to make higher highs (right upper orange line) this past month. But its rally is becoming less steep (as shown by the 10-day MA). So even though AMD is still rallying, buyers could be starting to lose their conviction. And that’s also backed up by the RSI, which has recently flatlined (right lower orange line) around overbought territory. This pattern led to AMD’s reversal when these two signals were diverging like this mid-year. If the RSI breaks lower and starts tracking back toward support, it could set up a potential short trade. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag Have you profited from AMD’s rally this year? Let us know your thoughts at feedback@opportunistictrader.com. IN CASE YOU MISSED IT… [Billionaires Preparing for Final U.S. Dollar Collapse?]( If you have any money in U.S. dollars, [click here now…]( Because our U.S. Treasury Department has scheduled an event for this month that could have drastic implications for 260 million Americans. The founder of the world’s largest hedge fund, Ray Dalio, legendary hedge fund manager John Paulson, and even the famous Rothschild family have started to prepare. 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