Watch these levels in AMD stock price

The central theses

  • After a spectacular start to the year riding the artificial intelligence wave on Wall Street, AMD shares have plummeted as investors doubt the company's ability to take a larger share of the booming AI chip market from technology giant Nvidia.
  • AMD shares have recently consolidated within a symmetrical triangle, a chart pattern that typically precedes a trend move toward a breakout or breakdown.
  • A breakout in AMD shares could initially see the price rise to $184 before potentially retesting its record high of $227.30.
  • A breakdown could trigger buying interest in the shares in a support zone between $132 and $116.

After a strong start to the year on Wall Street's artificial intelligence (AI) wave, shares of chipmaker AMD (AMD) have slumped as investors question the company's ability to take a larger share of the booming AI chip market from technology giant Nvidia (NVDA).

AMD shares rose 4.2% to close at $164.31 on Tuesday, but are down 28% from their March peak.

Below, we take a closer look at the AMD chart using technical analysis and point out the key chart levels to pay attention to.

Longer-term, AMD shares have trended mostly higher since the 50-day moving average (MA) crossed above the 200-day MA in March last year, triggering a bullish golden cross buy signal. However, the stock lost favor with investors between March and early May this year, falling as much as 38% from its record high during that period.

Consolidation within a symmetrical triangle

Recently, shares have been consolidating in a symmetrical triangle, a chart pattern characterized by two converging trend lines with opposite slopes. Typically, a breakout from this formation marks the start of a new uptrend, while a breakdown signals the start of a downtrend, especially if the move occurs amid above-average trading volume.

Given that the price is trading above the 50-day and 200-day moving averages towards the upper trendline of the symmetrical triangle, investors should watch for a short-term breakout but also keep an eye on the levels in case the stock breaks out to the downside.

Watch these key levels as the pattern breaks out

A breakout above the pattern could initially take the price to $184, an area on the chart where it could face resistance from above, originating from a horizontal line connecting a price range between January and April. A close above this level could give bulls the confidence to retest the stock's all-time high (ATH) reached at $227.30 in early March.

If AMD stock breaks out of the symmetrical triangle, it is worth keeping an eye on the area between $132 and $116, where the stock is likely to attract buying interest due to a support zone made up of various highs and lows that formed between May and December last year.

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At the time of writing, the author does not own any of the securities mentioned above.