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If you've been waiting for confirmation to pick up Advanced Micro Devices, Inc. (NASDAQ: AMD ), there's growing evidence - on and off the price chart - that the time is now. And if you're interested in improving your chances for profit while reducing risk in AMD stock, the place is here.
Source: AMD
Let me show you how.
A bullish "AMD 2.0" narrative discussed in early May was offered some additional confirmation this week. After years of missed opportunities and missteps, the company is mounting a successful turnaround under the strong leadership of CEO Lisa Su. Advanced Micro has just launched its Epyc enterprise server processor, and Wall Street is going bananas over AMD stock as a result.
Apparently, for good reason.
Aimed at the data center market, Epyc is a high-performance server processor which is positioned to beat Intel Corporation's (NASDAQ: INTC ) competing Xeon. That product currently holds a near monopolistic share of the market, but Epyc could pose a huge threat with it's lower pricing and power efficiency.
Wall Street won't see initial sales results for Epyc until the earnings cycle following next month's Q2 numbers. More important, though, is that Epyc is the latest product introduction that builds a truly sturdy case for "AMD 2.0." Advanced Micro Devices is increasingly well-positioned in key gaming arenas, the hotly contested cryptocurrency market, and now, it appears, in the cloud.
Interest in AMD stock looks equally piqued. Shares have charged higher by some 20% this week. Further, Wall Street still showing a behind-the-curve $11.50 median price target, 70% of analysts rating shares at a hold or sell and short interest of 14%, there's plenty of capitulation that can drive shares higher.
Advanced Micro's Chart
Click to Enlarge When I last wrote about AMD stock earlier this month as part of a tech slideshow, I proffered the monthly view as a very attractive pullback opportunity. At the time, the stock was trading near $12.25 in an inside candlestick pattern after testing a key pivot high dating back to 2010 for support.
As of Wednesday's close, shares are now 14% higher, though they're advancing further on Thursday. And as nice as the move has been, it's equally obvious that this turnaround may very well be just the beginning.
With the bullish price thrust, AMD stock has continued to confirm a building uptrend following a corrective double-bottom test on the daily. That's a more honed-in description of the bullish price action on the monthly chart.
Aside from Wednesday's move confirming a third higher-high pattern will be established, AMD also cleared an angular trend-line and the 62% retracement level of the corrective move. The case for the stock breaking out of a healthy-looking base of nearly five months in duration is building.
Your Strategy for AMD Stock
I believe Advanced Micro is not just ready for new heights, but also in a position to be bought on a pullback should that occur first. My suggestion: a bullish modified fence strategy.
Sell the Oct $12/$11 put spread and buy the Oct $15/$16 call vertical for even money.
On an expiration basis, the position affords a margin of safety of 13%, or down to $12, as no money was spent on the fence and the out-of-the-money put spread would be worthless. Below $11, and there is some risk involved. Technically, last week's pivot low of $11.21 would potentially raise a flag for some bulls.
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A widening of the put spread to $1.00 translates into the equivalent of 7% risk if one owned AMD stock outright. The upshot is risk is fully contained and the trader can participate in one and possibly two earnings cycles embedded in this October strategy.
Further, because of the limited and reasonable risk allotment, if you're inclined to own AMD stock at a steep discount, it's possible.
If AMD remains below $15 through expiration, both verticals expire worthless and no money changes hands. However, as the fence is long deltas, an interim move toward the call spread is in position to begin accruing profits prior to that spread having any intrinsic value.
Lastly, at expiration, if AMD stock is above $16, the call vertical will expand to its max payout of $1. That's a lot of something for nothing given the price of admission.
Investment accounts under Christopher Tyler's management currently own positions in AMD stock and / or AMD derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler's observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits .
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The post Advanced Micro Devices, Inc. (AMD) Stock Is a Buy, More Than Ever! appeared first on InvestorPlace .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
