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Trader who called the AMD breakout sees another 50% rally for the chip stock

VIDEO4:5104:51
One chipmaker may break out of trend channel stretching back to dotcom bubble

One semiconductor stock has soared above the rest in the past three months.

Advanced Micro Devices has exploded 21% higher since mid-April, making it the best performer on the SMH semiconductor ETF over the stretch and adding to massive gains for the year.

Todd Gordon, founder of TradingAnalysis.com, got it right. He said the rally would keep on roaring back in May.

"It's had a pretty significant breakout period here," Gordon told CNBC's "Trading Nation " on Tuesday.

On May 28, Gordon put on a 30/34 call spread that would have made the most profit if AMD ended as high as $34 by its July 19 expiration. AMD broke above $34 this week and has rallied nearly 30% since that call.

There's an even larger rally ahead for AMD, says Gordon.

"This is beginning to sort of develop into a generational breakout in AMD," he explained. "Look at the 2000 peak. We have a series of descending tops here which are lining up quite well, and as you can see, we're beginning to poke our head above that downtrend resistance level that's sourced from 19 years ago."

By charting the upward trend channel, Gordon has identified a level of resistance on the upper end.

"The resistance levels should come in approximately in the $50 region if we extend this higher," he said. "A potential technical ceiling won't come in until about $50."

AMD would need to rally another 48% to hit the upper end of that trend channel at $50. It would also mark a record high — AMD last hit a peak of $48.50 in mid-2000.

Gordon is putting on a trade to capture a move up to that resistance level. He is buying the Oct. 18 expiration 35 call and selling the 45 call. This is a bet AMD can move as high as $45 a share through to the expiration of the options contract.

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