Breakout Trade Setup: $AMD Earnings Play

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AMD earnings

As we enter earnings season during the pandemic, we are looking for trade setups that have the combination of bullish technical patterns and solid earnings growth.

Advanced Micro Devices ($AMD) is a potential breakaway gap up candidate heading into earnings, which are due after the close on Tuesday, April 28.

A breakaway gap up is an extremely bullish setup where the price “gaps” above the high of the recent price range, especially when the move is confirmed by heavier than average volume.

The weekly chart of $AMD below shows the 11-week long basing pattern. After the earnings report, an open above the base high of $59.27 would qualify as a gap up.

An ideal gap would be around 2-5% above the base high:


What makes this setup so powerful is that if $AMD breaks out to a new high in reaction to earnings, it will also correlate to a breakout to new all-time highs.

The prior all-time high was set in 2000, with another stall just below the prior high in 2006. This can be seen on the long-term monthly chart below:


If $AMD can clear the base high and hold, it will be the first time trading at a new all-time after coming out of a base.

In turn, this could lead to explosive price action.

Of course, this play is only valid IF the earnings reaction causes $AMD to gap above the base high shown in the first chart above.

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