Shares of Advanced Micro Devices, Inc. (NASDAQ:AMD) spiked on Monday after the company announced that it is forming a partnership with OpenAI. Many investors believe this will be a great fit.
At last check, the stock price was $211.92, up over 28.69% .
But the rally could be about to pause or even reverse. This is why Advanced Micro Devices is our Stock of the Day.
There are numerous old expressions and sayings related to the stock market. Some of them make sense. One of these is ‘sell at former tops.'
This refers to how stock rallies tend to encounter resistance when they reach a level that had previously been a peak or a top.
This is evident on the chart, where the $186 level is marked for Advanced Micro. It was a peak in July 2024. After reaching it, the stock reversed and began to head lower.
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It reached this level again in August. The same thing happened. It reversed and trended down.
There can be resistance at former peaks because some of the traders and investors who bought shares there regretted doing so after the price dropped. Some of them decided that if they could eventually sell their shares at the same price they paid for them, they would.
As a result, when the stock returns to the former peak, these regretful buyers place sell orders. If there are enough of them, it will create resistance at the level again.
Stocks can sell off of resistance when some of the sellers who created the resistance start to undercut each other. They know that buyers will go to whoever is willing to sell them shares at the lowest price, so they reduce their offering prices.
Other sellers see this and do the same. The resulting snowball effect can drive the price down.
As you can see on the chart below, Advanced Micro is approaching the $227 level. This was the peak and an all-time high in March 2024. There is a good chance the stock stalls out at this price. It may even reverse and head lower.
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