Trading Game Plan Revealed - 10/06/2025: AMD-OpenAI Deal Sparks Rally

The market kicked off the week with fireworks, driven by a blockbuster deal between AMD and OpenAI that sent shockwaves through the semiconductor sector. While the headline numbers sparked a massive rally in AMD, the fine print reveals a story that is far more complex and, frankly, concerning. In this morning’s Trading Game Plan, Gareth Soloway, Chief Market Strategist at Verified Investing, peeled back the layers of this deal, exposed critical warning signs on the major indices, and identified key levels across markets from Bitcoin to gold.

The AMD-OpenAI Deal: Creative Accounting or Genius?

On the surface, the deal announced this morning seems like a massive win for AMD. The company is set to receive $100 billion in revenue from OpenAI over the next four years. However, the devil is in the details, and the details are raising some serious questions about the nature of demand in the AI space.

Gareth broke down the troubling mechanics of the agreement: “OpenAI in return is going to get $160 million in warrants. So basically what they're going to get is warrants where OpenAI can purchase up to 160 million shares at a penny… And they can then sell those warrants to finance and pay for the chips. I am not making this up, folks.”

This structure is eerily similar to a previous arrangement between NVIDIA and OpenAI, where a massive investment from the chipmaker was essentially recycled back to them in the form of chip purchases. This practice of "robbing Peter to pay Paul," as Gareth described it, creates the illusion of organic demand. While the market is celebrating today, this type of financial engineering should give long-term investors pause.

“These type of deals show that there's something shady going on in the sector that's not being revealed just yet, and I do want us as investors to be aware of it,” Gareth warned. It begs the question: is the AI boom being fueled by genuine, sustainable demand, or are we witnessing a bubble inflated by creative financing and self-fulfilling prophecies? The deal raises critical concerns about shareholder dilution and the true net gain for AMD, a nuance lost in the frenzy of today’s 35% price surge.

A Zero-Sum Game in the Semiconductor Space

The market’s reaction to the AMD deal was not a universal lift for the tech sector; instead, it created a stark divergence. While AMD soared from its Friday close around $165 to trade at $223, its primary competitors felt the pain. NVIDIA (NVDA) dropped over 2%, and Broadcom (AVGO) was down around 3%.

This price action suggests the market isn’t viewing this as an expansion of the total AI pie, but rather as a reallocation of existing slices. OpenAI is diversifying its suppliers, which is a clear negative for NVIDIA, a company that would prefer to be the sole provider. It also serves as a powerful validation of AMD's technology, implying its chips are comparable to NVIDIA’s best offerings.

The broader market impact is even more telling. Many mega-cap tech stocks, including Meta and Google, were trading down this morning. Gareth observed, “I would almost argue that the S&P, the NASDAQ essentially would be negative today if this deal for AMD with OpenAI was not announced.” This suggests that the headline strength driven by one stock is masking underlying weakness across the market. This is a classic characteristic of a late-stage bull market, where narrowing leadership props up the indices while the majority of stocks may be struggling.

The S&P 500's Ominous Topping Tail

While the AMD news dominated the headlines, a far more subtle and potentially significant technical signal appeared on the S&P 500 chart. On Friday, the index printed a classic “topping tail,” a bearish reversal pattern that traders must watch closely.

A topping tail occurs when price pushes to a new high during the day but is aggressively sold off, ultimately closing in the lower 25% of the daily candle’s range. Its predictive power is magnified when it occurs at a significant resistance level. As if scripted, Friday’s high tagged a major trendline that Gareth has had on his charts for over a month. “Where did we top out on the S&P? Literally right at that trend line. It went up there, hammered, and reversed.”

This provides traders with a clear and actionable game plan. The topping tail signal remains valid as long as the S&P 500 does not achieve a daily close above Friday’s high of approximately 6,751. A trade based on this signal would involve a short position at current levels with a stop-loss placed just above that negation point. If the signal holds and the market turns lower, the first major support target lies at the uptrend line around the 6,650 level. This is a textbook example of using pure technical analysis to define risk and reward, free from the emotional hype of the day's news.

Bitcoin and Gold: Breakouts and Parabolic Moves

While equities are showing signs of divergence and potential topping, the crypto and commodities markets are displaying clear bullish momentum. Bitcoin has been a “rock star,” living up to the technical pattern that predicted its recent surge.

Last week, Gareth highlighted a multi-year trendline connecting the 2017, 2021, and recent market highs. History showed a clear pattern: whenever Bitcoin managed to close and confirm above this line, it resulted in a powerful move to a new all-time high. “Lo and behold, comes back in, rejected, didn't confirm, rejected, closed above, confirmed, new all-time high. See that? So again, the chart was basically telling us last week that this was going to push up and make a new all-time high.”

With the breakout confirmed, the next logical question is where the next resistance lies. By connecting the most recent swing highs, a simple trendline points to a potential target and decision point around the $126,600 level. This isn’t a prediction of a top, but rather a key technical zone where traders should monitor price action for signs of either continuation or reversal.

Gold is exhibiting a similarly powerful technical structure. After breaking out of a long-term parallel channel, it confirmed the breakout and successfully retested the top of that channel as new support—a classic technical sequence. To find the next upside target in this accelerating, parabolic move, we can draw a new, steeper parallel channel based on the more recent price action. This technique points to a potential pierce of the psychological $4,000 level.

Ignoring the Noise, Waiting for the Trigger

In a world of constant news flow, one of the most crucial skills for a trader is knowing what to ignore. This morning, the media is fixated on the government shutdown, but the market’s price action shows it is a non-event for now. As a technician, Gareth’s approach is simple: “If the markets don't care about it, then I don't care about it… I trade what the markets are doing or what they're showing us.”

This disciplined focus on price action over narrative is essential for avoiding emotional decision-making. Another critical discipline is the patience to wait for technical patterns to trigger before acting on them. The chart of the US Dollar, for example, is showing a potential inverse head and shoulders pattern—a bullish formation. However, many novice traders make the mistake of buying the pattern before it’s confirmed.

Gareth stressed the importance of waiting for a break of the neckline: “It only matters when it triggers… I've seen them fail 50% of the time when it's forming, unless it triggers. Once it triggers, probabilities increase that it will play out.” This highlights a core tenet of professional trading: it’s not about predicting what a pattern might do, but about reacting with a plan once it confirms its intentions.

Conclusion: Navigating a Market of Contradictions

Today’s market presents a fascinating set of contradictions. A spectacular headline deal is propping up the Nasdaq, yet the broader market shows signs of weakness. The S&P 500 is flashing a classic bearish reversal signal at major resistance, while assets like Bitcoin and gold are in the midst of powerful bullish breakouts.

This environment demands a disciplined, technical-based approach. The AMD rally, while impressive, is occurring right into a major double top resistance level at $227, presenting a potential shorting opportunity for nimble day traders. Meanwhile, key support levels on stocks like Broadcom (trendline at $324) must be monitored for signs of further breakdown.

The key takeaway is to let the charts be your guide. They provide an unbiased roadmap, free from the hype and potential deception of news headlines. By identifying high-probability setups, defining clear risk levels, and waiting for confirmation, traders can navigate this complex and eyebrow-raising market with logic and confidence.