Much needed retreat before a bigger move up

The semiconductor sector has been on a roll ever since last week rebounding strongly off the lows. The SMH looks like it might have a five wave pattern off the lows which is bullish but it faces a hurdle in the form of the upper downtrend line resistance from the July top. As such and especially after such a strong rally in the past week, caution must prevail and a retreat seems to be in the makings. A bullish scenario will see the retreat as a second wave that holds the necesary supports. A short retreat to the 38.2% Fib retrace levels might bode well and see a strong rally into the year end. A deeper retreat to the 50% levels and beyond might still see a year end rally but probably not as strong. 

Of all the semi names, the usual names such as Nvidia and AMD are in the mix. But this time round, technically, I like the looks of AMD. It has cleared its upper downtrend line that served as strong resistance and had that line had resisted multiple attempts to break higher. That line was broken on 1st November on heavy volume and the price has held well above that ever since. 

The price of 105 at that level was also important as some of AMD's largest trades historically were conducted around those levels. The things about such trades are we do not know if they were accumulations or distributions. We can only look at price actions to kind of guess. If prices hold above 105 sustainably, that might give an indication that those trades were buys. 

Technically, I believe AMD is due for a retreat and a retest of the trend line it punched above. A successful retest will give credence that the smart money is in and will support a further rally. 

This retest will also coincide with the second wave retreat at the 38.2% Fib retrace levels if the first wave top is at the 113-114 levels. 

If the support holds, I am expecting AMD to do well into the year end with conservative upper targets at the 130-140 levels. 

However, I do not think this is a long term buying position yet as I believe the general market is still poised for a big retreat in the early part of 2024 or even earlier. (I am risk managing according to price actions so levels change as market moves.)

The key to these alpha moves is agility and to be nimble and to pivot immediately the market moves against an ongoing thesis. So the moment price moves past my pivots, I am derisking. 

I believe 2024 is when the markets present us with awesome buying opportunities. It will be when nobody wants to buy anything and buying anything will feel kind of against the grain. 

At the moment, it is about surviving and capital preservation.

Disclaimer: Please kindly do your own due diligence as this is a sharing article and in no means financial advise. I am just sharing my opinions and thoughts.

Thanks for reading my commentary. Hope it helps!

Stay safe! 😊

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$Advanced Micro Devices(AMD)$ 

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