AMD Price Action and Volume Analysis
Could AMD be entering the second leg of it's breakout to all time highs (ATH)? (Side note: don't take this as financial advice, I'm just some guy on the internet)
While I have already taken an aggressive entry on AMD this past Friday after it gave the signal that it was moving from a Stage 1 Trading Range into a Stage 2 Uptrend, I figured I could still describe what I am seeing unravel before us and what I expect to happen/what my plan moving forward will be.
After AMD's strong breakout to ATH, we saw AMD finally lose steam and enter a Stage 4 Downtrend.
This downtrend continued with little bearish pressure compared to the rally that came before it. Signifying to me that even the bears expect this to continue to move up in the future and were simply looking for small profits here. We got the downtrend to bottom out near to 50% mark of the first rally.
The first sign of a reversal out of the downtrend that stuck out to me was the first bull wedge that finished forming with an overshoot of the trendline at the end. This represented climatic selling and exhaustion.
This bull wedge was followed by strong buying by the bulls and transitioned us into a Stage 1 Trading Range where the bulls and the bears had equal strength. Bulls would buy at the bottom of the range and sell at the top while bears would short at the top and buy to cover at the bottom of the range.
Notice the two bull wedges inside of the Stage 2 Trading Range. This let's us know that the bulls are gaining strength and the tide will turn eventually. Another signal that points to the turning of the tide, is the double bottom re-test after 3 bull wedges. This lets us know that the bears are weak. They have attempted to push the stock lower multiple times, but each time are overpowered by the bulls.
Eventually, the bears are going to step aside because they are tired of being beat and losing money and will let the bulls take control.
This then transitions us into our Stage 2 Uptrend, where the bulls have now taken control (for now). We can see a bull trend bar that is breaking above the Stage 1 Trading Range and the EMA. The bull trend bar closed near its high and had huge volume. Indicating the ignition of a new stage.
Currently, there is a bull flag forming that looks as though it will have a High 2 breakout. Contained within this flag is low bearish pressure, indicating the majority of bears are still stepping aside waiting for the bulls too cool off.
As I mentioned earlier, I have already taken a position on this swing on a lower time frame (LTF). This was taken with a half lot (half of my normal risk) since this was an aggressive entry. Once my trade moves 1 Risk Unit (1R) in my favor, I plan on buying another half lot to get full on my position. From there on out, I will add an additional lot to my position for every Risk Unit the trade goes in my favor. Additionally, I will trail my stop loss 1R below the current price.
For example, If this trade tags my trailing stop at 5R, I will ultimately walk away with a 12.5R profit due to my additional lots purchased every time my trade moved 1R in my favor. A 12.5R profit would be equivalent to a 12.5% Return on Investment since a full lot for my is 1% of my account size.
While I have already taken an aggressive entry on AMD this past Friday after it gave the signal that it was moving from a Stage 1 Trading Range into a Stage 2 Uptrend, I figured I could still describe what I am seeing unravel before us and what I expect to happen/what my plan moving forward will be.
After AMD's strong breakout to ATH, we saw AMD finally lose steam and enter a Stage 4 Downtrend.
This downtrend continued with little bearish pressure compared to the rally that came before it. Signifying to me that even the bears expect this to continue to move up in the future and were simply looking for small profits here. We got the downtrend to bottom out near to 50% mark of the first rally.
The first sign of a reversal out of the downtrend that stuck out to me was the first bull wedge that finished forming with an overshoot of the trendline at the end. This represented climatic selling and exhaustion.
This bull wedge was followed by strong buying by the bulls and transitioned us into a Stage 1 Trading Range where the bulls and the bears had equal strength. Bulls would buy at the bottom of the range and sell at the top while bears would short at the top and buy to cover at the bottom of the range.
Notice the two bull wedges inside of the Stage 2 Trading Range. This let's us know that the bulls are gaining strength and the tide will turn eventually. Another signal that points to the turning of the tide, is the double bottom re-test after 3 bull wedges. This lets us know that the bears are weak. They have attempted to push the stock lower multiple times, but each time are overpowered by the bulls.
Eventually, the bears are going to step aside because they are tired of being beat and losing money and will let the bulls take control.
This then transitions us into our Stage 2 Uptrend, where the bulls have now taken control (for now). We can see a bull trend bar that is breaking above the Stage 1 Trading Range and the EMA. The bull trend bar closed near its high and had huge volume. Indicating the ignition of a new stage.
Currently, there is a bull flag forming that looks as though it will have a High 2 breakout. Contained within this flag is low bearish pressure, indicating the majority of bears are still stepping aside waiting for the bulls too cool off.
As I mentioned earlier, I have already taken a position on this swing on a lower time frame (LTF). This was taken with a half lot (half of my normal risk) since this was an aggressive entry. Once my trade moves 1 Risk Unit (1R) in my favor, I plan on buying another half lot to get full on my position. From there on out, I will add an additional lot to my position for every Risk Unit the trade goes in my favor. Additionally, I will trail my stop loss 1R below the current price.
For example, If this trade tags my trailing stop at 5R, I will ultimately walk away with a 12.5R profit due to my additional lots purchased every time my trade moved 1R in my favor. A 12.5R profit would be equivalent to a 12.5% Return on Investment since a full lot for my is 1% of my account size.
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