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Advanced Micro Devices (NASDAQ: AMD ) stock has been red-hot, hitting new 52-week highs earlier this month. When it comes to returns, AMD stock is crushing its peers like Nvidia (NASDAQ: NVDA ) and Intel (NASDAQ: INTC ).

Why Advanced Micro Devices (AMD) Stock Can Break Out Source: Shutterstock

Even better, InvestorPlace readers who followed my advice have been crushing the trade too , riding the surge from about $30 to $34 and cashing out on its run into resistance . Now we have to consider when to buy AMD stock again and decide whether it can break out over its stiff resistance.

$34 has proven to be a tough nut to crack, but with the trend pointing higher, a breakout could be looming. AMD stock price fell slightly on Wednesday as it failed to exceed $74. Advanced Micro Devices stock was down over 2% in early trading on Thursday, thanks to a downgrade by Mizuho . In mid-afternoon trading today, the stock is down 0.2% to $32.90.

Mizuho analysts downgraded the stock to "neutral" from "buy," but raised their price target to $37 from $33. The new target is more than 10% above the current price of Advanced Micro Devices stock. Not that it matters all that much, but it's worth pointing out that the Street-high target for AMD stock is $43, about 30% above its current levels.

So can Advanced Micro Devices stock reach $43?

Trading AMD Stock

chart of AMD stock
Click to Enlarge

A look at the weekly chart above shows a pretty simple layout. AMD stock is being pushed higher by uptrend support (depicted by the blue line) and is finding resistance at $34. It temporarily broke above this mark earlier this week, but it wasn't able to stay above it.

That's not surprising, given how much resistance the shares face at $33-$34. In fact, I'd argue that it's healthy for AMD stock to back off its recent run a bit. The more shallow the dips become and the more times it tests $34, the more likely it is to push through that level.

This is setting up as a textbook ascending triangle formation. That's where a stock makes a series of higher lows, led higher by uptrend support, while regularly failing at a static level of resistance. That's exactly what Advanced Micro Devices stock is doing now.

That doesn't guarantee that AMD stock will break out or that it will push through $34. Advanced Micro Devices stock very well could lose uptrend support and tumble lower in the ensuing months. I would absolutely love another shot at AMD near the 10-week moving average, which is currently at $30.60, or near its uptrend support.

That would require a fall of about 7.5% of AMD stock price, which I'm not sure we'll get. The company reports its earnings on July 30, so investors looking to ride some pre-earnings momentum or those looking to avoid a potentially large move should keep that date in mind.

So what's the plan? Those who love AMD stock can gobble it up on any of these pullbacks. For more prudent investors, buying Advanced Micro Devices stock on a deeper pullback or on a breakout over $34 are possibilities. Like I said, I would love to buy AMD after it retests its support.

Valuing Advanced Micro Devices

Why is Advanced Micro Devices stock doing so much better than its peers? In 2019, AMD stock is up 78%, compared to just 28% and 5% for NVDA and INTC, respectively. Over the past 12 months, the performance gaps are even more stark.

AMD stock price has surged 97% in the last year, while NVDA has fallen almost 33%. Ouch. Intel is down about 5% during that span. This difference in performance is why I recommended a basket approach more than a year ago to protect against risk. While Nvidia has underperformed Intel, imagine owning just Intel or just Nvidia and watching AMD double. That's frustrating.

Luckily though, AMD's fundamentals are improving.

While Nvidia makes the best-in-class chips, AMD's products are making up ground. AMD's  products are being incorporated into more PCs, gaming consoles and other systems, enabling the company to generate strong top- and bottom-line growth. While Intel is struggling to generate growth and while Nvidia has negative metrics in 2018, AMD continues to pump out solid results.

Analysts, on average, expect AMD's revenue to eke higher by 6.3% this year to $6.88 billion. In 2020 though, the consensus forecast calls for a 22%surge to almost $8.5 billion. The company's earnings forecast is even more impressive, with average estimates calling for 43.5% growth this year and an acceleration up to 56% growth in 2020.

In 2020, the consensus estimate calls for earnings of $1.03 per share, which leaves AMD stock trading at roughly 32 times next year's consensus EPS outlook. That's a little pricey, considering how much better Nvidia's margins are than AMD's. But assuming AMD can meet the consensus growth estimates,  the valuation of AMD stock isn't all that unreasonable.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell . As of this writing, Bret Kenwell is long NVDA.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.

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