On Thursday evening, Benzinga asked its followers on Twitter what they’re buying at the open on Friday. From the replies Benzinga selected one ticker for technical analysis.
@TraderHockeyMom is thinking of taking a short position on Advanced Micro Devices, Inc (NASDAQ:AMD) at $106.30.
AMD reigned as the best performing chip maker stock on the S&P 500 for the month of May, rebounding 19% despite remaining more than 32% below the 2022 trading year opening price of $145.14.
The stock started the month of June off mostly flat but on Thursday, AMD rallied 7.75% and on Friday the stock was consolidating the move with an inside bar on the daily chart.
An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.
An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."
A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.
- Bullish traders will want to search for inside bar patterns on stocks that are in an uptrend. Some traders may take a position during the inside bar prior to the break while other aggressive traders will take a position after the break of the pattern.
- For bearish traders, finding an inside bar pattern on a stock that's in a downtrend will be key. Like bullish traders, bears have two options of where to take a position to play the break of the pattern. For bearish traders, the pattern is invalidated if the stock rises above the highest range of the mother candle.
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The Advanced Micro Devices Chart: AMD’s inside bar leans bullish because the stock was trading higher before forming the pattern. Friday’s inside bar is also taking place near the top range of Thursday’s mother bar, which also leans bullish for a continuation move to the upside.
- AMD is trading in a confirmed uptrend, with the most recent confirmed higher high printed on May 31 at 104.55 and the most recent higher low formed at the $99.55 mark on June 1. Eventually, AMD could retrace downward to print its next higher low, which could provide a solid entry point for traders not already in a position.
- Conservative bearish traders may choose to watch for AMD to negate its uptrend by printing a lower low in order to take a position. Bearish scalpers looking to flip a position quickly may have decided to enter short when AMD failed to break Thursday’s high-of-day.
- AMD has a gap above between $116.31 and $118.59 that was left behind on March 31. Gaps on charts fill about 90% of the time, which makes it likely the stock will rise up to fill the empty trading range in the future.
- The stock has resistance above at $106.99 and $112.61 and support below at $99.82 and $92.75.
