Advanced Micro just did something it hasn't done since the dot-com bubble

Advanced Micro Devices is having a bad case of deja vu.

A massive 139 percent rally this year has pushed AMD's stock to its most overbought since before even the dot-com bubble, a peak before its shares crashed.

One trader says it could burst again.

"It's had this great run but I do think it's going to take a little bit of a pullback here," Matt Maley, equity strategist at Miller Tabak, told CNBC's "Trading Nation" on Tuesday. "Every single time the RSI chart has gotten above 80 we've seen a significant pullback on the stock, so the fact it's up to 85 makes me very concerned."

AMD's weekly relative strength index, which measures momentum, topped 85 earlier this week, said Maley, a level even worse than during the dot-com bubble when it reached a top of 84.6. From their June 2000 peak to their October 2002 lows, the shares plummeted 94 percent.

Its RSI scaled back to 84.4 on Wednesday. Any reading above 70 is typically seen as overbought territory.

Big swings on higher-than-average volume also have Maley nervous. On Monday, for example, the stock rallied and then pulled back on volume of around 330 million shares. That volume is 450 percent higher than its average this year, said Maley.

"That's telling me it's a buying climax," Maley added.

Chad Morganlander, portfolio manager at Washington Crossing Advisors, is also wary of the big moves in AMD.

"I would actually fade this trade. I would be concerned about the high momentum. The whole sector has been absolutely white-hot," said Morganlander on "Trading Nation" on Tuesday. "Look no further than Nvidia as well, trading at over 10 times revenue. That's a danger point for us when it comes to valuation."

Nvidia has a price-to-sales ratio at around 12 times forward revenue, while AMD trades with a three times multiple. Both also have a price-earnings ratio at more than 35 times forward earnings.

"If you're looking for a value play in the chips sector, we would look no further than Qualcomm. We think that Qualcomm will have over 5 to 7 percent revenue growth over the course of the next 12 to 18 months and that valuations at a P/E multiple of 15 times make better sense," he said.

Qualcomm is up 9 percent so far this year, well below AMD's 139 percent increase and Nvidia's 43 percent run.

Disclosure: Chad Morganlander's firm owns Qualcomm.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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