AMD - Greed Doth Bad Habits BreedI've noticed that, especially in the last week, the trading community has really transformed into almost full bore greed. People are buying highs on almost anything, especially some of the most dubious of stocks, and getting rewarded with 5-15% gains every day.
There's even a popular post on here that asks "As new highs approach, what is the bear case?"
Whenever the climate is like this, you really, really have to take a step back and cool your head.
If we were in a sustained bull market like we had in 2021, greed may ostensibly be fair enough. But when the Fed rate is at 5.5 percent and there aren't going to be cuts, with 6% enroute before year end, and TBond yields acting like they want to court with 4.5% or 5%, you're sort of in the Twilight Zone right now.
If repricing to the downside really does occur, it's going to be fast and sudden.
AMD is the company that floundered, and hard, after losing the arms race to Intel for a lot of years. Then it hired a Chinese CEO, who flew over to the Chinese Communist Party's land and did some courtship, and then all of a sudden AMD was worth a lot of money, and has been for a while.
You have to really be very careful with anything connected to the CCP and China because of the geopolitical tensions between Xi Jinping and the International Rules Based Order.
All the yammering about "Taiwan" is about the IRBO looking to plant a man from Taiwan in Xi's seat when the CCP falls in the exceptionally near term future.
Yet Xi, a Chinese nationalist, can defend China's 5,000 year old Divinely-imparted culture, and himself, by weaponizing the 24-year persecution and organ harvesting genocide against Falun Gong that was launched by the Party and former Chairman Jiang Zemin on July 20, 1999.
If any of the above really transpires, please use your head: Beijing's noon is New York's midnight. Whatever happens in China is going to happen outside of NYSE/Nasdaq hours, which means those enchanted by greed are one day going to enjoy the bitter fruit of a brutal breakaway gap that never comes back.
So, AMD earnings are tomorrow post market. This is notable, because despite all the bull fever and delirium, I note that we really might be watching the markets top right now:
SPX - The Sound of a Shattering Iceberg
And if you take a look at a number of stock market calls I link below, you'll see there's a number of warning signals that are really worth considering, but still some pretty nice long opportunities.
So with AMD, what I'd like to point out as we head into earnings are two things:
1. The market makers left a goalpost at $133, based on the monthly. Price action absolutely does not have to take this point out, but since it counts as "resistance" to retail traders, it stands to reason it will go at some point
2. Price action since the late-June dump is NOT bullish. It is a classic markdown-and-sell-a-lot-more pattern that traps all the people who bought over $120 and have been comfortably numb averaging down.
On weekly charts, the red box is a place that price action is likely to return to, and the catalyst for this may very well be earnings.
There's really a precedent for this, with Taiwan Semiconductor, which I think is a very high likelihood long-term long even as markets sell off, because it's not a member of the Nasdaq or the SPX:
TSM - Taiwan, Your Semiconductor Long Hedge
An important thing to note about TSM is that it's a very similar set up to AMD, but also a lot more bullish of a pattern, and yet it lost some 7% on earnings.
Earnings plays are very hard because the fundamentals don't matter. You get major gap repricing and have to pay a high premium for leverage or for puts/calls to boot.
Yet, a dump under $100 for AMD would likely be a real buying opportunity with a target over $135.
While you might find it too good to be true, May was already a $50/65% month for AMD.
Yet nobody wants to buy when there's big red. Instead, they want to buy on green and HODL, because you've been so perfectly conditioned, Pavloved, and trained by smart money.
Alternatively, if earnings were to raid $135, it may very well be the sell of the year.
Good luck. With the situation as it is, you should always ask yourself: "Are we really going to set new highs, or are we at the top of a bear market rally?"
