AMD is another “catch a falling knife” trade. In fact, let me just re-post exactly what I said about the HPQ trade posted Friday, which is down big today: Please note: This is what is referred to in trading as “trying to catch a falling knife”. These type of trades are only for aggressive and nimble traders.
Basically, the same holds true for this AMD long setup: The stock is still in a clear downtrend, the risks are high and even more aggressive traders who decide to take this trade should adjust their position size accordingly.
Risk & return go hand in hand. AMD could easily open with a large gap down any day like HPQ did today but I also think that the R/R on this trade looks very favorable assuming that it breaks above this bullish falling wedge pattern soon, preferably on above average volume. As this trade has not yet triggered an entry, stops can’t be determined at this time. However, if AMD does trigger an entry while I’m out this week (I’ll be leaving town tomorrow morning for the Thanksgiving holiday, returning on Sunday), I would consider a stop with about a 5:1 or better R/R based on your preferred target due to the increased risk on this trade. Targets are listed on this 4-hour chart.