Advanced Micro Devices (AMD) dropped over 2% in the latest market session. This puts the stock at an important ascending trendline, which has provided consistent support since September. This trendline connects the low points from September and December, aligning with recent intraday lows. The stock is now at this crucial point, which often influences whether a trend will continue or reverse. Currently, the technical setup shows bearish signals. If the price breaks below this upward trendline, it would suggest buyers are losing control, possibly leading to further declines. There is concern regarding AMD’s position in relation to this support. For traders, there are two possible strategies: either enter when the trendline breaks or wait for a breakdown followed by a retrace to the trendline. Both approaches require patience and confirmation to reduce risks. As a well-known stock, AMD attracts a lot of trader attention, increasing the significance of its technical indicators. Key trendlines tend to draw focus and can influence market behavior. Risk management is essential, as trendline setups aren’t always reliable. By maintaining a structured approach and emphasizing confirmation and discipline, traders can let the chart guide their decisions rather than relying on assumptions. Looking back at late 2025, we monitored a key upward trendline on AMD that had supported the price for months. This support level failed in mid-December, confirming the bearish trend we had noticed. The stock then sharply declined and has been consolidating well below that old trendline. This technical weakness is now supported by fundamental challenges, as Q4 2025 server market share data from Mercury Research showed AMD’s growth stalling, just missing analyst expectations. Reports from the Semiconductor Industry Association also indicated a surprising drop in global chip sales for December 2025. This situation suggests any rallies in the stock may be temporary. For derivative traders, using the old trendline as new resistance is a viable strategy. We might consider buying put options or creating bear call spreads on any rally that reaches the area of the broken support from last year. The implied volatility has risen to around 45% as of January 2026, reflecting uncertainty about the next major market move. If the stock does not rise, we should watch the recent lows set right after the New Year. A clear break below this level would indicate a second downturn, and traders could use this as a signal to start new short positions with puts. Historically, after significant trendline breaks like the one in 2022, AMD experienced extended downside before finding a true bottom. With the Q4 2025 earnings season approaching later this month, managing risk remains crucial. Any positions should have clear exit points, as an unexpected earnings beat could quickly overturn the current bearish outlook. We will let the chart inform our decisions and will wait for confirmation before making any commitments.

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