AMD Moves into Overbought Territory After Analyst Update

Advanced Micro Devices, Inc. (AMD) shares rose more than 5% in early trading on Thursday after Rosenblatt analysts raised their price target to an analyst-high $30 per share, which represents a 44% premium to Wednesday's closing price. The analyst cited positive meetings with institutional investors and confidence in multi-year double-digital growth.

AMD has benefited from several positive developments. The company's new 32-core, 64-thread, second-generation Ryzen Threadripper delivered up to 53% faster multi-thread performance than Intel Corporation's (INTC) comparable Core i9-7980XE chip and up to 47% more rendering performance. At the same time, some investors have soured on NVIDIA Corporation (NVDA) following Citron Research's cautious report earlier this week, which prompted them to move into AMD as a GPU alternative. (See also: Learning From AMD's Massive Move.)

From a technical standpoint, the stock appears top heavy with an overbought relative strength index (RSI) reading of 75.86 and rapidly approaching trendline and R2 resistance levels. The moving average convergence divergence (MACD) remains in a bullish uptrend but may be losing some of its momentum. These indicators suggest that the stock could see some near-term consolidation before making a significant move higher.

Traders should watch for some consolidation at trendline resistance around $22.00 or R2 resistance at $23.19 over the near term. A breakout from these levels would lead to fresh all-time highs, while a breakdown from trendline and R1 support at around $20.00 could lead to a move toward the pivot point and 50-day moving average at around $17.50. However, the stock remains in a long-term bullish trend. (For more, see: Goldman Finally Bullish on AMD After 86% Rally.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.