Advanced Micro Devices' Roller-Coaster Ride

02/17/06 01:54:02 PM

by Koos van der Merwe

Advanced Micro Devices, a semiconductor manufacturer with facilities in the US, Europe, and Asia, with sales offices throughout the world, has had its ups and downs.

Security: AMD
Position: Hold

Advanced Micro Devices (AMD) is not an unknown company, unless you have only recently begun to trade stocks. AMD was one of the high-flyers of the dotcom boom, reaching a high of $48.50 per share in June 2000 from a low of $6.38 in August 1998. After the bubble popped, the price dropped to a low of $3.10 by November 2002. In more recent days, the rise of the share to $42.42 by February 2006 can therefore be considered justification of investing in a solid company. Now, AMD has once again given a buy signal. Is it worth buying at this high price?

Figure 1 is a daily chart of AMD and shows an acceptable Elliott wave count.

FIGURE 1: ADVANCED MICRO DEVICES, DAILY. This chart shows an acceptable Elliott wave count.

Graphic provided by: AdvancedGET.

The chart shows the rise from the low of $13.87 in April 2005 and is suggesting that the price is in a wave 4 correction with a flag formation. Wave 4 is projected by the Advanced GET software as bottoming either at $37.03 or $33.72 with a 65 PTI (65% probability) that the wave 5 target will be $72.78 (not shown). Should the price break above the upper resistance line, the flag pattern suggests a target of $50.34 (42.40 - 20.49 = 11.91 + 38.43 = 50.34). Of course, the flag could fall further in line with the GET prediction of a wave 4 bottom. This will reduce the target for the flag, and could change the GET forecast for the wave 5 target.

My chosen indicator is a stochastic 8,10,3, and shows that the trend could still be down, so wait for a breakout of the price out of the flag pattern, which could be a good buy signal.

This is a share that should be on your watchlist.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.