AMD, the hottest stock of the year, just fell into a bear market – here's when one technician would buy

Advanced Micro Devices' hot streak hit a brick wall this week.

Its shares were on track for a weekly decline of more than 10 percent on Friday, their worst in a year, and on course to fall into a bear market after having dropped nearly 20 percent from 52-week highs.

One chart watcher said more weakness could present an opportunity.

"It's got to get a little bit more worked off," said Matt Maley, equity strategist at Miller Tabak, Thursday on CNBC's "Trading Nation." "I like the 50-day moving average on the stock. That should be a good entry point. That provided good support back in both June and July."

AMD is still a 7.5 percent drop from its 50-day moving average of $25.55. Its shares dipped below that support line during sell-offs in February and March, but held above it through the summer.

"Once it breaks $26, you might want to add a little bit there and then get more aggressive as it gets closer to that 50-day moving average," said Maley.

AMD last traded below $26 in early September. Despite a 19 percent drop over the past three weeks, its shares remain 169 percent higher for the year in the best performance in the S&P 500.

Mark Tepper, president of Strategic Wealth Partners, is steering clear of AMD in favor of an alternative chipmaker.

"We wouldn't be buying AMD right now," Tepper said Thursday on "Trading Nation." "I would actually prefer Nvidia at this time. I just think there's more room for upside."

Compared with AMD's triple-digit surge this year, Nvidia has advanced by a more sober 41 percent. Its gains are far better than the 5 percent rise in the SMH semiconductor ETF in 2018.

"Nvidia's forward P/E is ... lower than AMD so it's more reasonably valued and quite frankly their chips have just consistently been better," added Tepper.

Nvidia trades at 36 times forward earnings, above the 13 times multiple for the SMH ETF. AMD trades at 44.6 times forward earnings.

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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 CNBC and 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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