AMD Shares Hint At A Reversal As Charts Show Bullish Stick Sandwich Following A Double Downgrade From HSBC

Shares of the semiconductor company Advanced Micro Devices Inc. (AMD) are showing signs of a potential reversal, despite experiencing a double downgrade from HSBC on January 8.

What Happened: The candlestick chart for AMD features a distinctive ‘Bullish Stick Sandwich’ pattern, which is recognized as a technical trading signal indicating a possible upward price reversal.

This pattern is characterized by three sequential candlesticks that visually appear akin to a sandwich on a price chart. A bullish candlestick is situated between two bearish candlesticks, suggesting that buying strength may be present amidst a bearish trend.

A more substantial middle candle strengthens this signal, indicating a period of buyer dominance. Confirmation of a reversal typically arises from subsequent bullish candlesticks which ideally break above the previous bearish highs.

In a recent post on X (formerly Twitter), John, the founder of Rock Trading Group, expressed optimism, stating, "Call me nuts I believe $AMD could outperform $NVDA this year,” highlighting the occurrence of the bullish pattern.

However, a technical analysis of AMD’s daily moving averages presents a less favorable outlook. On Tuesday, AMD’s shares closed at $116.09, falling below its eight-day simple moving average of $121.77 and its 20-day average of $122.83.

Moreover, the 50 and 200-day simple moving averages are also positioned above the current share price at $132.86 and $151.11 respectively, which implies a prevailing bearish trend.

Meanwhile, the relative strength index is recorded at 35.51, indicating the stock may be moderately oversold, although still remaining in the neutral territory.

Why It Matters: HSBC analyst Frank Lee recently downgraded AMD’s rating from “Buy” to “Reduce,” lowering the price target from $200 to $110 per share, a considerable 45% reduction.

Lee's research note suggests that he anticipates a decline in demand for AMD’s MI325 graphics processing unit (GPU) and potential supply chain challenges regarding high-bandwidth memory from Samsung. He further indicated that AMD might encounter competitive disadvantages in the AI sector until the release of its MI400 series, slated for late 2025 or early 2026.

In contrast, Loop Capital initiated coverage on AMD with a ‘Buy’ rating and a price target of $175 in a research note published on January 14. Loop Capital emphasized confidence in AMD’s growth prospects particularly within the accelerated computing market.

Loop Capital also pointed out AMD's potential for gaining significant market share in data center and PC segments, noting that AMD’s stock has been undervalued compared to competitors, despite underperforming the PHLX Semiconductor Sector index in 2024.

According to Benzinga, around 31 analysts maintain a consensus rating of “Buy” for AMD with an average target price of $184.53. Recent ratings from Keybanc, Loop Capital, and Wells Fargo average a price target of $163.33, suggesting a possible upside of 41.01%.

Price Action: On Wednesday morning, AMD shares increased by over 0.2% in pre-market trading. Over the past month, the stock has seen a decline of 8.37%, and it has dropped 26.87% in the last year.

AMD, HSBC, Stock