AMD shares have soared 170 percent this year, and its chart suggests more room to run

Shares of Advanced Micro Devices are on fire.

The stock soared 11 percent on Tuesday following several bullish notes from Wall Street analysts. AMD is now up 173 percent and is the S&P 500's top technology stock in 2018. Technical analyst Todd Gordon of TradingAnalysis.com says AMD shares could surge to $30 per share, a level the stock hasn't seen in 12 years.

"This is obviously this chip story stock here; it's in a great technical position, great fundamental story behind it here, and I like it a little bit higher here," Gordon said Tuesday on CNBC's "Trading Nation."

Examining a chart of AMD, Gordon has reached his conclusion using a classic technical strategy called the Elliott wave theory. The model utilizes so-called "waves" to imply where the stock is heading next. He pointed out what are typically the stock's three trend waves and two intervening corrective waves.

At this juncture, Gordon said, "I think we have one more pushup here into wave five," which projects a rise to $30 per share.

After that, things traditionally get rocky: The model then suggests a setback, followed by support, then a move higher.

The trade Gordon is using to capitalize on his bullish view is called a "butterfly" options trade, named for the shape the trade forms on the chart. It's not simply a long position, but a more complex trade thought to manage downside risk.

Gordon is planning to buy one Oct. 19 27-strike call option, sell two Oct. 19 29-strike call options, and buy one Oct. 19 31-strike call option for about 26 cents each, or $26 per options contract.

"As long as we exist between about $27.30 on the downside and about $30.60 on the upside, that's all profit. The body of the butterfly, right at the center-strike [of] $29, that's max profit of $174. This whole trade only costs $26. Ideally, the max payoff would be a $26 risk to make $174, but more realistically, you're going to be somewhere in this zone," he said, pointing to a zone on the chart.

AMD closed Tuesday 11 percent higher, at $28.06 per share.

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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.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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