Chip Stock “Buy” Signal Has Never Been Wrong – Forbes
Semiconductor stocks were on top of the world just three weeks ago. The VanEck Semiconductor ETF (SMH) hit a March 8, record high of $239.14, while chipmaker stalwarts NVIDIA (NVDA) and Advanced Micro Devices (AMD) also raced out peaks of their own that fateful Friday. Since then, though, the entire sector has cooled off, falling victim to a combination of profit taking and Fed-induced headwinds. AMD got hit the hardest, taking a roughly 23% haircut off its all-time high of $227.30.
The silver lining is that this drawdown has AMD encountering a historically bullish trendline on the charts, per our Senior Quantitative Analyst Rocky White. Last seen trading at $175.19, the stock was testing its 50-day moving average. For this study, the stock must be within one standard deviation of the moving average at its last low price, as well as north of said moving average 80% of the time in the past two months and in eight of the last 10 trading days.
AMD Stock Chart with 50-Day Moving Average
Per White’s data, five similar signals have occurred during the past three years. AMD was higher one month later after every signal, averaging a one-month gain of 8.2%. A similar move from the security’s current perch would place it just shy of $190, nearly recouping its month-to-date deficit of 8.9%.
Put traders are growing bolder, and an unwinding of this optimism could keep the wind at the equity’s back. AMD sports a 10-day put/call volume ratio of 0.77 that sits in the 93rd percentile of its annual range, per data at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Echoing this, the shares boast a Schaeffer’s put/call open interest ratio (SOIR) of 0.96 that ranks in the 80th percentile of readings from the past year.
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