AMD and Nvidia remain resilient!
The markets swooned on Tuesday. However despite that and after an initial dip, AMD and Nvidia climbed back up and Nvidia even managed to close in the green. To make it sound even more impressive, it is the only one amongst the magnificent seven to be able to do so. Talk about effort!
Ok so what does it say? Well, I would take that with a pinch of salt really. Firstly, volume is not convincing. That tells you something. On a day where every name seems to get pummelled, AI seems to be the ‘safest’ place around and that might have attracted some retailers to try ‘catch the dip’. AI is still very much in play and FOMO still around.
However the price action in the general markets is quite telling. The broad market index needs to hold 5050 or else, more selling might occur. The only scenario where I see more upside in the short term period is something like the blow off scenario of the 2000s where tech took off before diving. I am not saying it is similar although some are drawing parallels, but that scenario is very possible. That will take us to the 5300 levels on the broad market index.
However at the moment, the markets are heaving at a very critical resistance level. And technicals are screaming caution ahead. Risk rewards are just not that great here when you calculate all the probabilities.
I have shown Nvidia’s chart yesterday so nothing much to show other than a hammer to add to yesterday’s inverted hammer. Both not very encouraging candles for the bulls! The fifth wave in Nvidia’s pattern can extend as there is still a fourth and fifth wave squiggle theoretically possible but with such stretched technicals, a truncated pattern is not uncommon. So that fifth wave of fifth wave looks pretty much in place. Just needs a push over the cliff metaphorically speaking and we have that waterfall cascade into the big fourth wave retreat on a large scale (please kindly refer to Nvidia’s chart yesterday!).
AMD also looks similar in the last gasp of its fifth wave. The only difference is that Nvidia is way ahead in its technical pattern. It seems to be completing its big third wave. AMD however looks to be ,bullishly speaking, in the first wave of its big third wave so there is much upside to come. An expanded flat pattern I am considering as a contingency seems to be negated by price action so I am taking that off the table. In both scenarios, a pullback is on the horizon, just that the bullish scenario will see a gentler retrace and form a higher low to set up a base for that powerful third wave drive up once the upcoming pull back is done.
So to summarise, a pull back seems imminent. Not to sound like a Marvel script (pun intended considering Marvell is also an AI name!), it seems almost inevitable! The key is to prepare for it and to stay alive. This market is not easy and capital must be preserved. Hence, I am again sharing my defensive stance. Safety is always better considering the heightened risks all round.
Disclaimer: Please kindly do your own due diligence as this is a sharing article and in no means financial advise. I am just sharing my opinions and thoughts.
Thanks for reading my commentary. Hope it helps!
Stay safe! 😊
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