AMD Share Price: Present Rally Could Present New Selling Opportunity

Summary:

The AMD share price is trading higher for the 6th straight session, but price downgrade by Deutsche Bank could impact price in the future.

The AMD share price is currently down 0.31% in premarket trading but still retains bullish momentum after Wednesday’s standout performance that saw the stock gain 4.13%. Wednesday’s gain made it six winning sessions in a row after bullish sentiment continues to carry the tech stocks on the Nasdaq 100 index.

Netflix’s report showed a further loss in its subscriber base, but it was not as bad as expected. This improved the outlook for Nvidia, AMD and several semiconductor stocks. Despite the AMD share price target cut by Deutsche Bank from $115 to $85 with a HOLD recommendation, the stock still carries some bullish momentum from the Netflix earnings outlook.

So why is AMD up despite the downgrade of its 12-month price target? First;y, we need to understand that the AMD share price is vulnerable to consumer spending habits, as its GPUs and semiconductor products are found in household items such as gaming consoles.

As fears of a recession from aggressive rate hikes loom in the months ahead, we could see a change in consumer spending habits from non-essential goods to essential items such as food, housing and energy. Moreover, rate hikes sometimes take as much as two years to kick in when it comes to inflation control.

So in an environment where wages have not caught up with inflation with background recession risk, AMD could see a reversal of bullish sentiment, which is what Deutsche Bank must have considered in setting its 12-month price targets.

Near-term triggers for the AMD share price are its second-quarter earnings report, due on 2 August. The forecast is for the company to post earnings of $1.04 per share, with revenue of $6.53 billion. The company earned $1.13 per share in Q1 2022 and pulled in $5.89 billion in revenue.

The stock remains in a downtrend technically. The upward move is a retracement rally, fuelled by the price action completing the double bottom pattern via the neckline break at 79.68 (7 July high). The price activity now challenges the resistance at 89.16, the completion point of the measured move from the double bottom.

If the bulls push past this barrier, 95.52 (23 May high) becomes the next upside target. Additional targets to the north are found at 100.22 (psychological resistance and 4 May/10 June 2022 highs) and 106.33 (7 June high).

On the other hand, rejection of price action at 89.16 allows the bears to retest the 83.97 support (12 May 2022 low). A further decline challenges the former neckline at 79.68, with a continued decline bringing 72.47 (13 May 2021 and 1 July 2022) into the mix as an additional target to the south.