SIA Chartsā relative strength rankings help investors manage risk by identifying stocks and sectors which are underperforming relative to their peers and/or their benchmarks and should potentially be avoided. Staying away from stocks that are not attracting capital can help investors to avoid areas at higher risk of absolute declines and relative underperformance and to reduce negative event risk.
Semiconductor stocks started the year off strong and were one of the top performing groups for the first part of the year. In recent weeks, capital has started to rotate out into other sectors and relative outperformance has been eroded. For some chipmakers relative performance has also weakened relative to other stocks in the group.
Advanced Micro Devices (AMD), for example, started to slide down the rankings in the SIA S&P 100 Index Report about a month ago. Starting from near the top of the relative strength rankings, it fell out of the green zone earlier this month. Since then, AMD has fallen down through most of the Yellow Neutral Zone, and it is currently only a few spots away from dropping into the red zone. AMD is currently in 50th place, down 45 spots in the last month.
AMD was in the green zone between November and April, over which time it returned 46.2%, compared with a gain of 18.0% for the S&P 100 Index over the same period. Since leaving the green zone earlier this month, AMD has lost 3.3%, while the S&P 100 Index has lost 1.1%. This weekly chart highlights the severity of the recent breakdown in Advanced Micro Devices (AMD) shares. Over three weeks in late February to early March, AMD peaked in a bearish Evening Star pattern (circled) of a rally week followed by a bearish Shooting Start that suggested rally exhaustion, followed by a gap down and a selloff that signaled sellers gaining the upper hand.
Since then, the shares have been under distribution, snapping a downtrend line, taking out their 10-week moving average and breaking down below $170.00 which has reversed polarity to become initial resistance. Nest potential downside support appears near the $150.00 round number, followed by a previous breakout point near $130.00.
A big rally in Advanced Micro Devices (AMD) shares which started back in October peaked last month. Since then, the shares have turned sharply downward, giving back approximately $50.00 per share without even a three-box bounce along the way, a sign of increasing distribution. Recently, the shares completed a bearish Double Bottom breakdown, signaling the start of a new downtrend.
Based on previous column highs and lows, potential downside support tests appear near $148.55, $134.55, $126.90, and $121.85 on trend all of which are still well above the October 2023 low. Initial resistance on a rebound may appear near $174.10 based on a 3-box reversal.
With a bearish SMAX score (which is a near-term 1 to 90-day indicator comparing an asset against different equal-weight asset classes) of 5 out of 10, AMD is exhibiting short-term weakness against the asset classes.
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