I am a firm believer in buying quality businesses when they go on sale. While emotions run high during bear markets and stock market corrections, that’s often the best time for long-term investors to start shopping.
If you’re an experienced trader or market speculator, then it may be best to trade with the trend. At this moment, that trend is lower. If traders don’t like shorting, they may very well wait for better trading conditions by waiting for a new uptrend to form.
Since trying to time the market is not a good idea, investors might consider a dollar-cost-average approach or another way to buy good companies at good prices.
I consider two such companies to be Advanced Micro Devices (AMD) – Get Advanced Micro Devices Inc. Report and Nvidia (NVDA) – Get NVIDIA Corporation Report.
The two have both reported solid earnings results and both companies are forecast to continue driving earnings and revenue higher. That goes for this year as well as the out-years.
Economic contraction or not, these companies just aren’t feeling the pinch — at least not yet. Yet the two stocks have been cut in half from the all-time highs made in the fourth quarter.
These are moments to begin accumulating. For more precise technical analysis, let’s look at the charts.
Trading Nvidia Stock
Let’s start with Nvidia, where the price action has not been encouraging.
After the stock’s big fall from the late-March high, a modest rally to the 10-week moving average rejected the stock as Nvidia now sits near the 2022 low.
Scroll to Continue
From here, the bulls need to see Nvidia stock stabilize in the $155 to $160 area. If it can do that amid a bevy of bad news for the market, then we could have another bounce on the way.
Specifically, a rally could send Nvidia back to the 10-week moving average, followed by the $195 area. This zone rejected the stock earlier this month. Above that and $208 to $215 could be on the table.
On the downside, a break of $150 could open the door to more selling pressure. Specifically, it could put the $115 to $125 level in play.
Near that zone we find a number of notable measures, including the 2021 low and the 200-week moving average. There’s also a downside extension level near this zone (at $130), while the 78.6% retracement is just below this area (near $110).
Trading AMD Stock
AMD stock has held up marginally better than Nvidia has, which I don’t think many investors expected. In any regard, it recently broke the key $84 to $86 zone.
This area has been significant over the past two years and it’s also the 61.8% retracement from the all-time high to the covid-19 low in March 2020. Lastly, it’s around where AMD found support earlier this year.
Now breaking below this level, the stock is vulnerable.
If the stock flushes lower, the $73.85 to $75 zone is the first downside target. The second target is $64 to $66, where AMD stock finds the 78.6% retracement, 200-week moving average and the monthly VWAP measure.
However, the key to watch now is $84. If AMD stock can bounce before a significant pullback and reclaim this level, then we could be looking at an upside reversal.
In that scenario, a move back above $85.50 puts $92 back in play, then the 10-week moving average and the $100 to $104.55 level — the latter of which is last month’s high.