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Fan Yang

Advanced Micro Devices (AMD) Retreats to Our Anticipated Support

Last week, we looked at AMD after a bullish breakout and discussed the pullback scenario. We wanted to anticipate this scenario as part of the buy-on-a-dip strategy. As we start this week, AMD is exactly where we were anticipating support. So let's take a look at the trade idea again.

AMD Daily Chart

(click to enlarge)

- Last week, we talked about the 12.40-12.50 support area. 
- Here price is testing the broken falling resistance as support. This is also a previous support/resistance pivot. 
Downside Risk:
- Though the first key support is in this area, we have to consider risk of further pullback that is still within the bullish scenario.
- For example, let's say price slides below 12.40, the next key support will be around 12, probably just below 12. 
- Here, around 12, price will test a rising support. Also, the RSI would likely be down around 40. This would be like the last line of defense for the bullish scenario.
Reward to Risk:
- Because price hasn't really stopped the decline from last week, we should anticipate some further downside.
- 12.20 is in the middle of our 2 projected support levels. 
- Let's say we put a stop at 11.20.
- The upside is either going to miss the previous high around 14.67 or extend above the previous high towards the 15.35 high on the year. 
- Let's say the 2 targets are 14 and 15.30. 
- The reward to risk for the conservative target is 1.8:1. The slightly more aggressive target gives a reward to risk ratio of 3.1:1. 
- I think this trade idea has a decent R:R profile to be considered. 

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