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Advanced Micro faces key resistance that could produce 'spectacular' rally, chart analyst says

VIDEO4:0204:02
AMD needs to crack this level before moving higher

The semis stocks are on track for their worst month since 2008, but one name is holding above the fray.

Advanced Micro Devices has rallied 5% in May, the only stock in the SMH semiconductor ETF that is positive for the month. Todd Gordon, founder of TradingAnalysis.com, said the name now faces a critical test that, if it passes, could produce an explosive rally.

"If we go all the way back here to 2000 and we just throw up a trend line across the top we can see that we've intersected this line and we have two formation points" in 2000 and 2006, Gordon told CNBC's "Trading Nation " on Tuesday. "It looks like we're trying to get that head of steam to eventually break up through the $35 to $40 region and when we break, it should be pretty spectacular."

AMD needs to rally another 20% to touch $35, a level that corresponds with the long-term trend line. The stock has not traded above $35 since April 2006.

"This is an almost 20-year trend resistance. I like the formation here, near term just around the $30 region. We've been fairly quiet here in April and May, through this pretty good period of volatility in the overall market," Gordon said. "When we do finally get range expansion and we break out of there, try to retest the old highs … I'm going to go ahead and put on a little options trade here to take us out of this consolidation and just simply capture this zone right here."

To take advantage of an expected breakout, Gordon is buying the July 19 expiration 30/34 call option spread for roughly 98 cents. This is a bet that AMD can move as high as $34 before expiration, or 17% upside from current levels.