Bears in Charge Ahead of AMD Report

Advanced Micro Devices Inc. (AMD) reports Q1 2021 earnings after Tuesday’s closing bell, with analysts expecting a profit of $0.44 per-share on $3.20 billion in revenue. If met, earnings-per-share (EPS) will mark a 240% profit increase compared to the same quarter in 2020. The stock sold off 6.5% in January after beating Q4 2020 estimates and has continued to underperform into the second quarter.

Posting Year-To-Date Loss

AMD and NVIDIA Corp. (NVDA) posted impressive 2020 returns in reaction to multiple missteps at Dow component Intel Corp. (INTC). INTC sentiment has improved substantially in 2021 but that didn’t stop NVDA from posting an all-time high just two weeks ago. Sadly, AMD has failed to match the performance of either rival, slumping to an 8% year-to-date loss while entering the third month of dead price action at the 200-day moving average.

Raymond James analyst Chris Caso outlined the bull case last week, noting “the stock’s pullback has been driven by improved sentiment that Intel will solve their manufacturing challenges, which will reverse AMD’s successes. We’re taking the other side of that view. Now that Intel has committed to internal manufacturing, we think it’s unlikely that Intel ever regains a transistor advantage vs. AMD, and the current roadmaps ensure an advantage for AMD/TSMC through at least 2024”.

Wall Street and Technical Outlook

Wall Street consensus matches this analyst’s view, with an ‘Overweight’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, and 12 ‘Hold’ recommendations. However, three analysts now recommend that shareholders close positions and move to the sidelines. Price targets range from a low of $70 to a Street-high $120 while the stock closed Friday’s session more than $20 below the median $105 target. This low placement reflects skepticism about the chipmaker’s ability to compete with larger rivals.

AMD completed a breakout above the 2000 high in the 40s in July 2020 and entered a trend advance that lost steam in the 90s in September. It posted an all-time high at 99.23 in January 2021 and eased into an intermediate correction that reached the 200-day moving average in February. Price action has gone comatose while a monthly Stochastic sell cycle still hasn’t hit the oversold level. In turn, this tells us that bears remain in firm control of the ticker tape.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Mixed Outlook Ahead of Intel Report

Dow component Intel Corp. (INTC) reports Q1 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of $1.14 per-share on $17.97 billion in revenue. If met, earnings-per-share (EPS) will mark a 21% profit decline compared to the same quarter last year.  The stock gave back a 6.5% advance after beating Q4 2020 top and bottom line estimates in January but performed well into early April, posting a 15 month high.

Investing in Local Fabrication

Investors have forgiven the chip giant after 2020 missteps forced loyal customers to cut deals with competitors Advanced Micro Devices Inc. (AMD) and NVIDIA Inc. (NVDA). NVIDIA, in particular, is rolling out highly-competitive products at a lightning pace, ready to build even greater market share in coming years. Intel has shifted gears to meet the challenge, investing billions to become a major foundry supplier. That effort could pay off, given worldwide chip shortages this year.

Needham analyst Pat Gelsinger posted upbeat comments about the initiative in March, noting “With most of the world’s leading edge foundry capacity now concentrated in Asia, Intel also launched Intel Foundry Services (IFS) to address the industry’s capacity constraints and need for more geographically balanced manufacturing capacity, with manufacturing locations in the U.S. and Europe. Intel also announced it will be spending $20 billion to build two new fabs in Arizona, which will support its current products as well as its foundry customers.”

Wall Street and Technical Outlook

Wall Street sentiment remains mixed despite share gains, with a consensus ‘Hold’ rating based upon 15 ‘Buy’, 1 ‘Overweight’, 15 ‘Hold’, and 2 ‘Underweight’ recommendations. More importantly, 8 analysts still recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $40 to a Street-high $90 while the stock is set to open Thursday’s session about $6 below the median $70 target. This low placement could support rapid upside in reaction to a strong report.

Intel topped out in the upper 50s in 2018 and eased into a complex pattern, ahead of a 2020 rally and failed breakout during the pandemic decline. Steep declines have posted four lows in the mid-40s in the last three years, draining bullish sentiment and shareholder patience. The stock rallied within a point of 2020’s multiyear high this month but accumulation-distribution has failed to recover, setting off a bearish divergence that raises odds for another steep downturn.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

U.S. Market Wrap and Forecast for Tuesday

Major benchmarks popped up to new highs at the start of Monday’s U.S. session but conviction was low, yielding a slow motion downtick that got bought over the noon hour. SP-500 Volatility Index (VIX) gained about 2% despite higher equity prices, signaling nervousness about the endless uptick. Even so, the U.S. government is about to send citizens another barrel of greenbacks, just in time to reload slumping Robinhood accounts.

No Love For FAANG Stocks

Amazon.com Inc. (AMZN) failed a symmetrical triangle breakout last week and is consolidating near the February low, about to enter the eighth month of dead sideways action. There’s a lot of ‘dead’ money hanging around big tech stocks these days, with more aggressive capital rotating into fintech, EV plays, and SPACs. The GameStop ‘event’ hasn’t helped traditional buying interest, unnerving many risk-adverse bulls.

Other tech stocks gained ground on Monday, lifting shares of NVIDIA Corp. (NVDA), International Business Machines Corp. (IBM), and Advanced Micro Devices Inc. (AMD). However, PHLX Semiconductor Index (SOX) looks like its grinding through a corrective pattern that could roll over and test the January low at any time. Twitter Inc. (TWTR), General Motors Co. (GM), and Walt Disney Co. (DIS) posted strong upside as well, which is more bearish than bullish headed into their mid-week reports.

Looking Ahead to Mid-Week

Partisan politics could control price action through mid-week, with an impeachment trial and its foregone conclusion feeling like a waste of time during stimulus negotiations. In addition, the rally is getting ‘long in the tooth’, raising odds for a multiweek reversal that ‘sticks’. The Nasdaq-100 index tested or crossed the 200-day EMA five times in 2019 but just once in 2020 and it’s now been 10 months since that instrument shook out weak hands.

This week’s economic calendar is light as a feather, with the CPI report on Wednesday and UMich Sentiment on Friday. Neither is likely to move bond or equity markets, allowing macro influences to control the ticker tape. The upcoming holiday weekend in the United States could impact trading later in thes week, with a well-documented positive bias likely to support higher prices. Even so, a contrarian would say that clear blue skies foretell ominous dark clouds.

For a look at all of this week’s economic events, check out our economic calendar.

Short Squeeze Mania – Stocks Swoon

It’s officially “stonk season” in the markets. The IPO market continues to baffle, and SPACs continue to pop-up like weeds in your front yard.

Plus if you’ve seen GameStop (GME), AMC Entertainment (AMC), and Blackberry (BB) lately, you know the Robinhooders are at it again.

These speculative gambles are ridiculously frothy right now as hedge funds and institutions continue to try and cover their shorts. The moves these stocks are making are more detached from reality than the guy in a buffalo headdress at the Capitol 3 weeks ago.

Complacency is the most significant near-term risk to stocks by far, and I have been warning about this for weeks. It also reminds me of the Q4 2018 pullback ( read my story here ).

It’s also earnings season (for those who care, like analysts), and it’s time for some big swings and volatility.

Well, not entirely. Monday (Jan. 25) saw a sudden mid-day plummet and subsequent recovery, and Tuesday (Jan. 26) traded slightly down. Wednesday (Jan. 27) looks set to open lower – we will see how that ends up.

Earnings have so far impressed, though, and there were some big moves from individual stocks.

General Electric (GE) popped over 9% thanks to a healthy outlook for 2021 and better than expected industrial free cash flow.

Johnson & Johnson (JNJ) also saw a nice 3% gain after beating earnings. Investors are also eagerly anticipating results from its vaccine’s trial. Johnson & Johnson’s vaccine is one dose and does not require any crazy storage protocols like Pfizer (PFE) and Moderna’s (MRNA). Strong results and FDA approval could genuinely change the tide of the pandemic and vaccine rollout.

Earnings from Microsoft (MSFT) and Advanced Micro Devices (AMD) also came in after the closing bell and impressed as well. Microsoft posted record quarterly sales, and AMD exceeded $3 billion in revenue.

Does this mean we’re all clear now and can party like it’s 1999?

Not exactly. Plus, if you’re a stock nerd like I am, you don’t want to party like it’s 1999. Because that means 2000 will come—the end of one of the biggest parties, investors have ever seen. I’m talking about the dot-com bust.

Fair warning: the S&P 500 is still at or near its most-expensive level in recent history on most measures, and the Russell 2000 has never traded this high above its 200-day moving average.

The more GameStop pops, the more of a circus I think this market is. GameStop a $15+ billion company? Really? A correction at some point in the short-term would not be shocking in the least.

John Studzinski , vice chairman of Pimco, believes that market valuations are sound and reflect expectations of this eventual reopening and economic recovery by the second half of the year.

I agree on some level about the second half of the year. Outside of complacency, though, I have other short-term concerns.

For one, trillions in imminent stimulus could be useful for stocks but bring back inflation by mid-year. The worst part about it? The Fed will likely let it run hot. With debt rising and consumer spending expected to increase as vaccines are rolled out to the masses, the Fed is undoubtedly more likely to let inflation rise than letting interest rates rise.

All of this tells me that the market remains a pay-per-view fight between good news and bad news.

We may trade sideways this quarter- that would not shock me in the least. But I think we are long overdue for a correction since we haven’t seen one since last March.

Corrections are healthy for markets and more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what should be a great second half of the year.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

In a report released last Tuesday (Jan. 19), Goldman Sachs shared the same sentiments.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth. Hopefully, you find my insights enlightening, and I welcome your thoughts and questions.

We have a critical week ahead with the Fed set to have its first monetary policy meeting of 2021 and more earnings announcements. I wish you the best of luck. We’ll check back in with you at the end of the week.

Small-caps are Too Hot to Handle

Figure 1- iShares Russell 2000 ETF (IWM)

As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks underperformed the larger indices on Tuesday (January 26). The RSI is no longer technically overbought, but I still think that the Russell has overheated in the short-term. Stocks don’t just go up in a straight line without experiencing a sharp pullback. That’s just the nature of the beast.

Barron’s also claims that the Russell 2000/S&P 500 ratio has entered a powerful 15-year resistance area .

Nobody knows what will happen during this critical week of earnings, but I called a decline after the IWM began the week over a 70 RSI. Indeed the IWM is having a down week to this point, but it’s not sharply down enough for me to switch my call. Not even close.

I love small-cap stocks in the long-term, especially as the world reopens. Small-caps are also the most likely to benefit from Biden’s aggressive stimulus plan.

But the index has overheated. Period.

Before January 4, the RSI for the IWM Russell 2000 ETF was at a scorching hot 74.54. I called a sell-off happening in the short-term due to this RSI, and it happened.

After the RSI hit another overbought level of approximately 77 two Wednesdays ago (January 13), the IWM declined by another 1.5%. I said that Russell stocks would imminently cool down because the RSI was too hot, and precisely that’s what happened.

Consider this too. In its entire history as an index, the Russell has never traded this high above its 200-day moving average.

Small-caps may have priced in vaccine-related gains by now, and some stimulus optimism may have been priced in too.

I hope small-caps decline before jumping back in for long-term buying opportunities. I love where these stocks could end up by the end of the year.

SELL and take profits if you can- but do not fully exit positions . If there is a deeper pullback, this is a STRONG BUY for the long-term recovery.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

AMD Hovering Under 100 Ahead of Report

Advanced Micro Devices Inc. (AMD) reports Q4 2020 earnings after Tuesday’s closing bell, with analysts looking for a profit of $0.30 per-share on $3.02 billion in revenue. If met, earnings-per-share (EPS) will mark a slight profit decrease compared to the same quarter in 2020. The stock fell 4.1% in October despite beating Q3 top and bottom line estimates, with shareholders jumping ship after the company announced it would acquire Xilinx Inc. (XLNX) for $35 billion.

Is AMD Paying Too Much for Xilinx?

The stock has been running in place since early September, trading around the summer rally peak at 94.28. Outsized share gains and concerns the company is paying too much for Xilinx have weighed on buying interest but the overall pattern in the last five months looks bullish, raising odds for a sustained breakout into triple digits.  Even so, Intel Corp (INTC) missteps in the last year have yet to translate into higher AMD profits.

Cowen analyst Matthew Ramsay raised his target to $110 earlier this month noting, “We expect a strong Q4 and raise our 2021 revenue estimates as AMD’s share gains in PC, server, and console markets continue to track above consensus. 2021 EPS ticks down entirely due to higher 15% tax rate, and we introduce well-above Street 2022 numbers. We upgraded Intel today on the potential of the CEO change, but AMD’s momentum is here and now (and increasing).”

Wall Street and Technical Outlook

Wall Street consensus has deteriorated to an ‘Overweight’ rating after historic share gains, based upon 18 ‘Buy’ and 12 ‘Hold’ recommendations. Two analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $13 to a Street-high $120 while the stock opened Monday’s U.S. session about $6 below the median $100 target. A breakout after an upside surprise is possible with this placement.

The stock topped out in the mid-90s in September and has failed three breakout attempts into January 2021. Price action has held high in the 5-month trading range but selling pressure has increased, dropping accumulation-distribution readings to the lowest low since July when AMD was trading more than 40 points lower. Higher-than-expected quarterly profits could overcome this deficit while an earnings miss is likely to drop price into fourth quarter support in the 70s.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

3 Semiconductor Stocks Testing Their All-Time High

Semiconductor stocks have outpaced the S&P 500 by around 25% so far this year as investors bet on insatiable demand, driven by 5G smartphones, artificial intelligence (AI) devices, and a rebound in auto and industrial end markets. Evercore ISI analyst C.J. Muse recently told clients he sees the group growing for the next six to eight quarters, with revenues jumping 14% in 2021 to $500 billion.

Below, we take a look at three leading chip stocks trading near their all-time high (ATH) and point out crucial technical levels worth watching.

Advanced Micro Devices, Inc.

Advanced Micro Devices, Inc. (AMD) designs and manufactures microprocessors for the computer and consumer electronics industries. The Santa Clara company entered its foray into supercomputing in May 2019, announcing that its chips would power Frontier – an exascale system designed to innovate in areas such as AI, machine learning, and data analytics. Analysts expect the chipmaker to post 40% sales growth for fiscal 2021, followed by another 26% in fiscal 2022.

Chart watchers should look for a breakout above a five-month trading range that has established clear resistance around the ATH at $96.37. Look for the bullish momentum to continue on a move through this level.

Analog Devices, Inc.

Massachusetts-based Analog Devices, Inc. (ADI) produces analog, mixed-signal, and digital signal processing chips. The company, which generates about 70% of sales from industrial and automotive end markets, forecasts first-quarter fiscal EPS to come in at $1.30 on revenues of $1.5 billion. This indicates respective top- and bottom-line line growth of 15% and 26% from a year earlier.

Chart wise, the shares broke out from an inverse head and shoulders pattern in early November, suggesting further upside. More recently, the price has remained above the 20-day SMA after reaching its ATH at $146.31 on Dec. 8.

Xilinx, Inc.

Xilinx, Inc. (XLNX) processes and designs integrated circuits for use in communications, data processing, industrial, consumer, and automotive industries. The computer chipmaker has made inroads into the data center market by designing programmable processors that speed up compressing videos and providing digital encryption. In October, Advanced Micro Devices announced that it has agreed to purchase Xilinx in a $35 billion all-stock deal.

After climbing to a new ATH at $151.54 earlier this month, the shares retraced to the April 2019 high, where previous resistance now acts as support. A push higher from this level in recent trading sessions indicates further momentum-based buying.

For a look at today’s earnings schedule, check out our earnings calendar.

Advanced Micro Devices Headed For Triple Digits

Advanced Micro Devices Inc. (AMD) is having an outstanding 2020, posting a 105% year-to-date return. Better yet, the stock has finally worked off extremely overbought technical readings incurred during the third quarter’s vertical advance and could break out, lifting into triple digits for the first time in its multi-decade public history. Right now, the sky’s the limit for AMD in 2021, barring unforeseen headwinds.

AMD Capitalizing On Intel Misfires

The chip manufacturer has Dow component Intel Corp. (INTC) to thank for its rising fortunes, with delayed product releases and corporate misfires opening the door for smaller rivals to grab precious market share. New customers are discovering lightning-fast chip sets backed up by glowing reviews, making a return to the old school tech behemoth less likely.  More importantly, INTC is still tripping over its own feet, with no plans to dump ham-fisted management.

President and CEO Lisa Su reiterated her bullish outlook on AMD at Credit Suisse’s 24th Annual Technology Conference on Nov. 30, sharing optimism about the personal computer market and noting new profit opportunities emerging in the near- and medium-term. She also advised the company’s game console portfolio is continuing to while ramp up while they add innovative products in the lucrative graphics and cloud server markets.

Wall Street And Technical Outlook

Wall Street coverage has grown more cautious in reaction to historic share gains, with a ‘Moderate Buy’ rating based upon 13 ‘Buy’ and 6 ‘Hold’ recommendations. One analyst now recommends that shareholders take profits and hit the sidelines. Price targets currently range from a low of $13 to a Street-high $120 while the stock opened Tuesday’s U.S. session about $3 above the median $90 target. Upside may be delayed into 2021, given this elevated placement.

The stock broke out above the 2000 ‘bubble’ high in January 2020 and entered a testing phase that carved an ascending triangle across the contested level. It finally confirmed the breakout in July and took off like a hot rocket, adding nearly 40 points into the September high at 94.28. Rangebound action found support in the 70s in November, yielding an uptick that’s now reached the prior high. Just a small catalyst should be needed at this point to lift price above 100.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

U.S. Stocks Set To Open Higher After Yesterday’s Sell-Off

Republicans And Democrats Achieve No Progress In Stimulus Negotiations

It looks like traders have abandoned hopes that a new stimulus package will be negotiated before November elections.

House Speaker Nancy Pelosi has recently stated that she remained optimistic about the deal but there are no additional signs of progress.

Nevertheless, S&P 500 futures are gaining ground in premarket trading as traders position themselves for a week full of earnings reports. Apple, Amazon, Alphabet and Facebook will provide their quarterly reports this week.

If their reports are strong enough, the market may be able to shrug off virus worries and focus on the profitability of leading companies.

AMD Buys Xilinx For $35 Billion

Advanced Micro Devices (AMD) decided to acquire its peer Xilinx for $35 billion in an all-stock deal. With this deal, AMD wants to get an additional advantage over its main competitor Intel.

The deal values Xilinx at $143 per share and is expected to close by the end of the next year. Currently, Xilinx shares are gaining more than 15% in premarket trading while AMD shares are gaining about 1%. Shares of Intel are flat.

The big deal in the semiconductor space has the potential to provide additional support to tech stocks during today’s trading session.

Durable Goods Orders Increased By 1.9% In September

The U.S. has just provided Durable Goods Orders report for September. On a month-over-month basis, Durable Goods Orders increased by 1.9% compared to analyst consensus which called for growth of 0.5%. Excluding Transportation, Durable Goods Orders increased by 0.8% compared to analyst consensus of 0.4%.

This report is a pleasant surprise after yesterday’s New Home Sales report which showed that New Home Sales declined by 3.5% month-over-month in September while analysts expected that they would grow by 2.8%. The surprising weakness of New Home Sales put additional pressure on stocks during yesterday’s trading session.

Today, the encouraging Durable Goods Orders report may provide some support to stocks and help traders to forget about their virus-related worries.

For a look at all of today’s economic events, check out our economic calendar.

Advanced Micro Devices to Acquire Rival Xilinx for Over $30 Billion; Target price $120 in Best Case

American chipmaker Advanced Micro Devices (AMD) is in advanced talks to acquire its rival semiconductor manufacturing company Xilinx in a deal that could be worth over $30 billion, the Wall Street Journal reported, citing people familiar with the matter.

According to the WSJ, both the chipmakers are discussing a deal that could come together as early as next week. However, there is no assurance that they will for sure ink the deal.

AMD’s shares fell 2.5% to $84.33 in pre-market trading on Friday; however, the stock is up about 90% so far this year.

Advanced Micro Devices (AMD) stock forecast

Twenty-five analysts forecast the average price in 12 months at $83.78 with a high forecast of $120.00 and a low forecast of $62.00. The average price target represents a -3.16% decrease from the last price of $86.51 From those 25, 12 analysts rated “Buy”, 12 rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley target price is $73 with a high of $95 under a bull scenario and $39 under the worst-case scenario. Jefferies boosted their stock price forecast on Advanced Micro Devices to $100 from $95. Deutsche Bank boosted their target price on Advanced Micro Devices to $70 from $50 and gave the company a “hold” rating in July.

Other equity analysts also recently updated their stock outlook. In July, Barclays boosted their target price on Advanced Micro Devices from $50 to $55 and gave the company an “equal weight” rating. At last, Royal Bank of Canada boosted their target price to $84 from $71.

Analyst view

“Advanced Micro Devices (AMD) continues to execute on its product roadmap while Intel experiences process technology delays on 10nm server and supply shortages at the low end of the PC market,” said Joseph Moore, equity analysts at Morgan Stanley.

Zen drives further share gains for AMD, as we estimate the company gaining share in desktop, notebook and server processors in 2020 and 2021. We model Computing and Graphics revenue of $5.9bn (up 25.9% y/y) and Enterprise, Embedded and Semi-Custom revenue of $3bn (up 46.5% y/y).”

Upside and Downside Risks

Upside: 1) PC and Zen server share gain accelerates as Zen adoption picks up; Intel’s competitive response at 10nm is less impressive than expected. 2) Console cycle turns out to be stronger than expected – highlighted by Morgan Stanley.

Downside: 1) Intel’s server CPUs for 2020 (Cooper Lake in 1H on 14nm and Ice Lake in 2H on 10nm) stifle AMD’s momentum and allow it to regain share. 2) AMD loses graphics share to NVIDIA. 3) Console cycle underperforms expectations.

Blame it on The Nasdaq

US data announced this week showed a significant recovery in building permits and housing, building permits (MoM) for July surged to 18.8% compared to the previous 3.5%, Housing Starts data revealed 22.6% which is 5.1% higher than the previous month, existing-home sales data were as well positive reported beyond expectations.

Despite the negative Jobless claims and Philadelphia Fed Manufacturing PMI reported on August 20, Manufacturing PMI and Services PMI demonstrated a significant improvement, which led major US Indices to surge whereas S&P500 and Nasdaq100 reached the all-time high.

US stocks continue hitting records, Tesla surged by 24.19% breaking the significant $2000 per share value, and is now worth more than $382 billion surpassing Walmart by nearly $10B. Nasdaq’s top company by market cap – Apple gained 8.23% hitting the $2127B in capitalization. Tesla and Apple remain the top popular shares last week based on Robinhood data.

S&P500 closed above the all-time high, some might think that there is a possible double top pattern, economic recovery of the US indicates that the index may continue the run towards $3500.

Nasdaq owes its gains not only to Tesla and Apple, but there are also other tech companies that surged last week and during the pandemic, such as NVIDIA, AMD, Qualcomm, Microchip Tech, Texas Instruments.

An hourly chart demonstrates that the correction is most likely will happen as the price touched the dynamic resistance and the fifth wave of an ending diagonal is about to complete at 11600. Ending diagonal is a trend reversal pattern, which usually demonstrates exhaustion of bulls, note the evening star doji, though the closing is above the previous close, it still shows uncertainty and exhaustion.

NDX chart by TradingView

How is it related to cryptocurrencies and Bitcoin?

Bitcoin and Ethereum price actions are considered as cryptocurrency market movers. Since Bitcoin is nowadays considered as the digital Gold and Ethereum as a digital Silver, their price action now is correlated to US data which effect Gold. Gold was ever since used as a safe-haven to hedge funds during the uncertain times and inflation, so is Bitcoin now.

An hourly chart of Bitcoin indicates that the price could decline further to towards $11200 – $11160 to complete the Head and Shoulders pattern, another pattern to watch is an ending diagonal which is yet to be completed as well. Bitcoin remains below the major resistance level of $11700 an in order to show another bull run it must break the dynamic resistance (ending diagonals upper edge) and close above the 11700, however testing 11200 might bring another stimulus for bulls.

BTCUSD price on Overbit

Ethereum plummeted to $380 after reaching the year’s maximum at $446.67, loosing 9.7% this week only. Digital Silver price is following a similar ending diagonal pattern, and if the upper dynamic resistance and a static resistance of 397 is not overpassed, ETH might continue the drop towards a major support at $380, and if that support is broken, towards $370 – 369.

ETHUSD price on Overbit

Unlike Bitcoin, Gold lost only 0.20% in price for the week. A significant drop was on Wednesday August 19 ahead of US data announcements, where the precious metal lost 3.67% after gaining 2.97% on Monday and Tuesday.

Head and shoulders pattern is identified on an hourly chart of Gold and the price might continue the drop down to $1881.60 – 1880, where if the support laid on those level withheld the price might retrace towards 2014 and if above towards 2046, where the bearish pattern will be completed.

Gold price on Overbit

Since Gold and Silver prices demonstrate similarities in their price action, the same Head and Shoulders is visible on an hourly chart of XAGUSD. The price is below the dynamic support of August 12 which might signal to a further decline down to $25.30.

Silver price on Overbit

The price continues the short-term downtrend move inside a descending channel, which in other had forms another controversial to the H&S pattern of Bullish Flag.

Silver price on Overbit

If bulls are able to push the price above the dynamic support and if the dynamic resistance is overtaken at $27, the bullish run might proceed towards $28 – 28.50.

Key takeaways for the upcoming week would be announcements from Eurozone, Great Britain, China and the US.

Important announcements to watch:

Tuesday, August 25, 2020

German GDP (YoY) as per Second quarter data is expected to be -11.7%, 9.8% lower than the previous -1.9%

German GDP (QoQ) as per Second quarter data is expected to be -10.1%, 7.9% lower than the previous -2.2

US CB Consumer Confidence (August) is expected to be 93, 0.4 points higher than the previous 92.6

US New Home Sales (July) is expected to be 786K, 10K higher than the previous 776K

Wednesday, August 26, 2020

US Core Durable Orders is expected to be 2.1%, 1.5% lower than the previous 3.6%

Thursday, August 27, 2020

US GDP (QoQ) as per 2nd Quarter is expected to be -32.6%, 0.3% higher than the previous -32.9%

US Initial Jobless Claims is expected to be 1,000K, 106K lower than the previous 1,106K

US Pending Home Sales (MoM) as per July is expected to be 4.5%, 12.1% points higher than the previous 16.6%

Asides from the data to be announced, there are other important events to trace.

Republican National Convention, which will be held on Monday, in which delegates will determine the nominees for the upcoming presidential elections. Markets will be watching this event closely as during the current campaign Democrats are having an edge over republicans.

Source: Yahoo Finance

Another major event would be an annual Jackson Hole conference this Thursday, August 27, where FED Chairman Jerome Powell will speak about current economic situation, inflation targets and possibly share preliminary focus on interest rate change.

The economic state and inflation in the US once again are an important constituent of the Global economy and global markets, all these events will be decisive for the mid-term price movements for the US Indices, commodities and cryptocurrencies.

Advanced Micro Devices Near All-Time High After Historic Breakout

Advanced Micro Devices Inc. (AMD) soared after beating Q2 2020 profit and revenue estimates in July, underpinned by a remarkable 45% year-over-year increase in Computing and Graphics division sales. The smaller Embedded and Semi-Custom division grew 62% during the quarter while Enterprise income fell 4%. The chip manufacturer ended the bullish call by raising Q3 revenue guidance by a wide margin, now expecting to book between $2.45 and $2.65 billion.

Advanced Micro Devices Taking Market Share From Rivals

The company is taking advantage of systemic delays at larger rival Intel Corp. (INTC), expanding a loyal customer base by getting highly-competitive next-generation processors to market at a faster pace. Both central processing unit (CPU) and graphics processing unit (GPU) sales are posting impressive growth, with formerly-loyal NVIDIA Corp. (NVDA) users making the switch. The graphics segment has been growing exponentially since the first quarter.

Cowen analyst Matthew Ramsay raised their AMD target from 90 to 100 last week, noting “We had the opportunity to host AMD CEO Dr. Lisa Su for a series of virtual investor meetings/calls. Messages of road map consistency, execution dependability and much closer collaboration with key customers shone through. With Intel’s road map in flux, but in larger measure due to AMD’s own product innovation, we forecast share gains and strong revenue/margin growth.”

Wall Street And Technical Outlook

Wall Street consensus has eased off extremely bullish levels, with extraordinary share gains lifting Advanced Micro Devices above some valuation targets. It’s currently rated as a ‘Moderate Buy’, based upon 14 ‘Buy’, 11 ‘Hold’, and one ‘Sell’ recommendation. Price targets now range from a low of $50 to a street-high $120 while the stock closed Friday’s session about $3 above the median $81 target. This placement suggests that further upside will be limited without fresh upgrades.

Technically speaking, the stock is extremely overbought after gaining more than 60% so far in the third quarter, raising odds for a multi-week range or deep retracement. The turnaround may have already begun because bear power has increased since the uptrend hit an all-time high at 87.29 more than two weeks ago, forcing weekly relative strength indicators to roll over. Even so, weakening technicals have yet to issue a strong sell signal so an assault on 100 is still possible.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Main Trend Changed to Down on Friday

The technology-driven September E-mini NASDAQ-100 Index dropped sharply on Friday as investors fled market-leading tech shares due to mixed earnings reports and growing signs of a worsening coronavirus pandemic, which could exacerbate a deep economic recession. Geopolitical uncertainties also added to investor skittishness ahead of the weekend.

On Friday, September E-mini NASDAQ-100 Index futures settled at 10460.75, down 87.50 or -0.84%.

For the second day in a row, the tech sector weighed heaviest on all three major U.S. stock averages. Intel led the decline on Friday, its shares plunging after the chipmaker reported a delay in production of a smaller, faster 7-nonmeter chip.

In other news, Intel rival Advanced Micro Devices Inc shares jumped, while Tesla Inc extended Thursday’s losses.

Daily September E-mini NASDAQ-100 Index

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trade through 10358.75 on Friday changed the main trend to down. The main trend will change to up if buyers take out the pair of main tops at 11058.00 to 11058.50.

The first short-term range is 9728.75 to 11058.50. Its 50% level at 10393.50 was tested on Friday.

The second short-term range is 9368.25 to 11058.50. Its retracement zone at 10213.25 to 10014.00 is the next downside target zone.

The third range is 8841.00 to 11058.50. Its retracement zone at 9949.75 to 9688.00 is another potential support area.

The combination of the retracement zones creates a potential support cluster at 10014.00 to 9949.75.

Short-Term Outlook

Our best downside target on Monday is 10014.00 to 9949.75. Since it is a potential support cluster, we’re anticipating that counter-trend buyers will show up on a test of this area. This could trigger a technical bounce.

If 9949.75 fails then the market is going to move into the wide retracement zone at 9949.75 to 6988.00. Aggressive counter-trend buyers could step in on a test of this area also.

Despite the change in trend to down, we’re still looking for a labored break because of the large number of retracement levels. This could create choppy, two-sided trading conditions.

For a look at all of today’s economic events, check out our economic calendar.

Advanced Micro Devices At Cusp Of A Major Breakout

Advanced Micro Devices Inc. (AMD) has defied skeptics so far in 2020, posting an all-time high in February and then recouping a 38% pandemic-driven decline by mid-April. Rally momentum stalled after the company reported inline Q1 2020 metrics one week later, highlighted by 40% growth in year-over-year revenue. Mixed guidance failed to stir buying interest, triggering an 11% downdraft that found support at 49. That trading floor has held firm into the third quarter.

Well-respected CEO Dr. Lisa Su took a victory lap after the report, declaring “we executed well in the first quarter, navigating the challenging environment to deliver 40% year-over-year revenue growth and significant gross margin expansion, driven by our Ryzen and EPYC processors”.  She offered a sober-but-upbeat outlook, noting “while we expect some uncertainty in the near-term demand environment, our financial foundation is solid and our strong product portfolio positions us well across a diverse set of resilient end markets”.

AMD Taking Market Share From Rivals

Advanced Micro Devices should benefit from repeated delays in Intel Corp. (INTC) server platform and other time-sensitive projects, allowing the smaller fabricator to take market share. It’s also growing central processing unit (CPU) sales at a healthy clip and has grabbed a fair share of the graphics processing unit (GPU) market from rival NVidia Corp. (NVDA). That segment has been growing exponentially since pandemic shutdowns began in the first quarter.

Wall Street And Technical Outlook

Wall Street consensus now rates the chip stock as a ‘Moderate Buy’, with 12 ‘Buy’ and 9 ‘Hold’ recommendations. No analyst currently advises that shareholders sell their positions and step to the sidelines. Price targets range from a low of $33 to a street-high $70 while the stock is now trading more than $7 below the median $57.50 target.  This positioning bodes well for additional gains in the third and fourth quarters.

Advanced Micro Devices’ technical outlook is much stronger now than three months ago, with the stock carving a horizontal trading range at the February 2020 high. In turn, this price action has completed the handle in a bullish cup and handle pattern that forecasts an impressive breakout, with the potential to reach a measured move target in the lower 80s. That rally, if it unfolds, would book an impressive 35% and 40% return from the currently-traded level.

With GPU Sales Cooling After Crypto Craze, Investors Ask What’s to Happen With the Mining Infrastructure

For investors who have been watching the cryptocurrency movement over the past year, it’s apparent that the so-called “crypto mania” has come to an end, or at least on hold for a while. After cryptocurrency prices skyrocketed towards the close of 2017, all of the top 10 high market cap coins have now settled into more muted prices down, in some cases, nearly 80% from their all-time highs. Looking at the charts for bitcoin (BTC) and ether (ETH), it’s clear that the impressive bull run has tapered off to arguably more sustainable levels.

Bitcoin (BTC)

Bitcoin Daily Chart
Bitcoin Daily Chart

Ether (ETH)

ETH/USD Daily Chart
ETH/USD Daily Chart

As with nearly everything in the economy though, industries are connected together one way or another. One of the questions many in the cryptocurrency world hadn’t considered after the decline of crypto prices is how that fall will impact other facets of the economy. That fall in cryptocurrency prices, along with an increased focus on newer consensus mechanisms that aren’t processing-intensive (like different variants of proof-of-stake over the current proof-of-work model), has led to a decline in sales of graphics processing units (GPUs) for producers like AMD and Nvidia. While mining on the Bitcoin network is dominated by ASIC miners, other cryptocurrencies are still largely mined viaGPU mining operations, though that could soon be changing.

Crypto GPU Sales Down

Nvidia, the popular GPU manufacturer known for making a variety of cards for the gaming industry and, more recently, the crypto mining industry, recently announced a “substantial decline” in revenue from cryptocurrency miners. According to the company’s CFO Commentary on Second Quarter Fiscal 2019 Results, the company was anticipating a drop in GPU sales, though the reality was more significant than they accounted for.

According to the report, “Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific revenue was $18 million. Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.”

Competitor AMD is in a similar situation as well. After releasing second quarter earnings earlier in the summer, the chip producer noted that their quarter-over-quarter decline in revenue in the computing and graphics segment was “primarily related to lower revenue from GPU products in the blockchain market.”

Cryptocurrency prices aren’t the only factor to blame for the decline in GPU sales either. One of the topics at the center of the cryptosphere right now is about alternatives to the standard consensus mechanism known as proof-of-work (PoW). As newer methods are proposed, developed, and eventually implemented, GPU sales are likely to continue declining in the crypto-related industry.

Heavy Infrastructure Investment

Besides trading and investments made directly in the cryptocurrency world, there has been a significant amount of investment funneled into business related to the crypto industry as well. Unlike the early days of bitcoin, cryptocurrency miners are no longer individual enthusiasts running gaming PCs in their bedroom.

Nowadays, there are entire cryptocurrency mining operations being funded and built across the globe. In Montana, US, Power Block Coin LLC is investing $251 million into a new cryptocurrency mining farm where the facility will be stocked full of mining equipment, and they’re not alone.

In upstate New York, US, there’s an even larger cryptocurrency mine under construction. The new facility in Massena, NY is being built by Coinmint and is estimating up to $700 million in investment going to the mining operation. But with all this funding being put into mining farms and large-scale operations, investors in these ventures are beginning to wonder what’s to come of them in the event that they become obsolete in the crypto world or if interest in mining dies off more. Here are some of the alternatives.

Crypto Mining Alternatives

While the cryptocurrency markets are cooling down on GPU mining, there are still viable alternatives for all the hardware and infrastructure created in the industry. Looking back to the comments from Nvidia’s CFO, there’s another area that led strong growth throughout the year that aided in offsetting a decline in crypto-related GPU sales. According to the CFO commentary:

“GPU business revenue was $2.66 billion, up 40 percent from a year earlier and down 4 percent sequentially, led by record performance in Gaming, Professional Visualization, and Datacenter, offsetting a substantial decline in cryptocurrency GPUs.”  

Professional visualization, video rendering, and developing AI are all areas of the tech economy that cryptocurrency farms can look to in the future. If investors are looking for a return on their investment, farm operators still have options. In fact, there are companies in the space already angling themselves for a significant shift in the coming years.

Marco Iodice is the co-founder of Leonardo Render, a blockchain-based startup working on incorporating much of the infrastructure already in place for mining to profit from large-scale, enterprise-level graphical rendering needs in the growing CGI industry. All of those mining farms can put their GPUs to work for them not mining, but as a means for graphical rendering. He sees the same thing that Nvidia saw in revenue as well and believes there are other solutions for miners, saying that:

“In 2017 we witnessed the ‘gold rush’ of GPUs with people gathering as much hardware as possible to grab some crypto, which caused the price of hardware to skyrocket along with the price of cryptocurrencies. Now that the market is down and there’s less interest in mining, many have hardware that is only worth half of the purchase value. So the best solution, in my opinion, is to keep the equipment so carefully collected and assembled and wait for a new way of using it, ideally more profitable and less volatile than crypto mining.”

Similarly, Tatau is another blockchain-based startup that’s focusing on using the infrastructure to fill other demands. Like Leonardo Render, Tatau is connecting those with computational power across the industry to put their machines to work not for mining, but for outsourcing jobs that require large amounts of computing power. In the case of Tatau, that’s being done for developing AI and the compute-intensive processes associated with it.

Regardless of what the future holds for the cryptocurrency markets, the current state is no longer supporting GPU mining at the scale that it once was. Because of that, investors need to start looking at alternate ways for these mining operations to be put to use. Significant investments were made to create the farms, now it’s up to business owners and investors to ensure the infrastructure is adaptable for the future of the crypto world.

Advanced Micro Devices, Inc. (NASDAQ:AMD) Takes Fight To Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA) After Stellar Q1 Results

Advanced Micro Devices, Inc. (NASDAQ:AMD) stock rallied after the company provided a second-quarter forecast that topped estimates. Investors also pushed the stock higher on the chipmaker posting first-quarter financial results that beat Wall Street expectations.

AMD Q1 Financial Results

The company reported earnings of 11 cents a share, beating analysts’ estimates of 9 cents a share. Last year, the company reported a net loss of (-$0.04) a share. Revenue in the first quarter was up 40%, to $1.65 billion and in the process beat Wall Street estimates of $1.57 billion.

Revenue growth was attributed to growth in the Graphics business Segment that posted revenues of $1.12 billion representing a 95% increase. Revenue could have been much higher had the Enterprise and Semi-Custom segment not posted a 12% drop in revenue that came in at $532 million. AMD attributes the decline to a drop in semi-custom revenue.

AMD also reported solid margins for the first quarter that came in at $36%, compared to 4% as of the end of the first quarter of last year. Lead operating income stood at $120 million compared to just $11 million. After struggling for almost a decade to post profits, AMD reported $114 million increase in net income that came in at $81 million.

For the current quarter, the company said it is expecting $1.72 billion in revenue compared to estimates of $1.58 billion. Blockchain accounted for 10% of the company’s revenue. However, the chip giant has warned of a potential decline in graphics revenue in connection to the blockchain.

Revenue Growth Drivers

Stellar first-quarter earnings and a positive second-quarter outlook underscores the success that AMD is getting with its Ryzen and Vega-based GPUs. AMD is increasingly becoming Ryzen driven company given that 60% of its revenue came from the sales of Ryzen products. The company is also benefiting from an increase in the prices of average desktop chip

The chip giant is already taking the fight to the likes of Intel Corporation (NASDAQ: INTC) with its Epyc server chips as it looks to gain market share in the lucrative marketplace. According to the Chief Executive Officer, Lisa Su, the company is poised to control mid-single-digit server unit share before the end of the year.

“I will say, for the first-generation Epyc, we’re seeing really nice customer interest, and it’s quite broad. And so it is across enterprise as well as the hyper-scale customers. And we view this as a multigenerational play, so we’re very excited about what Epyc can do over the next couple of quarters,” Su saidda.

AMD is slowly gaining a competitive edge against its fierce rivals after stealing market share from NVIDIA Corporation (NASDAQ: NVDA) in the graphics card market The Company also stole some market share from Intel in the Desktop chip market.

Focus going forward is on the launch of the second and third generation of the Epyc chips with production set for early next year. In addition to the Epyc Chip AMD continues to attract interest from companies with large data centers testing out its AMD Radeon graphics cards designed to handle artificial intelligence workloads.