Thursday, December 14, 2006

Dummy Trade of the Day - Advanced Micro Devices, Inc. (Public, NYSE:AMD)

The Thomas Weisel comments on MSFT Vista and graphics suppliers AMD (ATYT) and NVDA which I posted in pre-market, were very compelling. We had a strong open but the SOX was definitely pacing the way, so I decided to stay focused on these two names. NVDA presented the first low risk entry around 10:30. I had already mapped out resistance at $37.30 from three previous failed attempts (daily timeframe). It was a calculated risk that didn't pan out, so I folded on the first lower high.
AMD broke its downsloping trendline on high volume. Shortly after 10:30 it started to consolidate on declining volume. As the consolidation progressed it started to form a symmetrical triangle. I entered long on a high volume break of the triangle. My initial stop was set at the base $21.00. I knew we would run into resistance of the downsloping 50 MA from the daily timeframe ($21.85). Again, I mapped it out on the 15 minute chart. Notice how price consolidated for a long time when it came into this level of resistance. The bulls eventually persisted and succeeded in moving higher. As you can see from the chart, this second break presented another low risk entry point.

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