To The Moon

Hi everyone. Today I’ll be updating my TA on one of the AI darlings of early-2024:

SoundHound AI, Inc. (NASDAQ: SOUN)

In my previous newsletter on SOUN, I was very bullish on it because I saw a very promising setup forming. However, SOUN has since seen a break of the bullish support trendline from Feb’24. Note that this usually precedes a larger move down.

On the lower hourly timeframes, I note that there are several top heavy candles with significant volume, suggesting that larger players are selling. We also rejected off prior support levels at 5.84 and 4.95.

The most likely scenario in the near term, given price action of other smaller cap stocks that I’ve watched, is for SOUN to return back towards 3.11 at the very least and retest the island gap it formed in Feb’24.

My personal thesis, however, is more extreme. I believe that SOUN is headed lower, back towards its Dec’22 support trendline (in orange) and to retest the strong support at 2. This would coincide with a wider market pullback that is expected to occur in the coming months.

In light of the deteriorating technical setup and the structural breakdown, I am downgrading SOUN from a BUY to a SELL. A more than 50% haircut from current levels, with no guarantee of the support trendline holding, could invite opportunity cost by holding the stock through its drawdown. Therefore, I am of the view that capital deployed into SOUN can be better deployed elsewhere.

In that case, when do I turn bullish on SOUN? Only if it can reclaim the 4.95 major resistance level and turn it into support. As mentioned in my previous newsletter, this was a major resistance over the past 3 years, and failure to break resistance here has historically seen drawdowns to the 2s.

Sentiment: SELL (Downgraded from BUY)

Summary (with Price Targets - NFA):

• Structural breakdown which should most likely see a retest of 2 and the Dec’22 support trendline in the next few months - have indicated key support levels on my daily chart

• In the near term, the stock should come back into its 2.42-3.11 island gap from Feb’24

• Will only turn bullish on the stock if it is able to reclaim the key resistance level at 4.95

All right, that’s all for this newsletter. Till next time!

$SoundHound AI Inc(SOUN)$ $NVIDIA Corp(NVDA)$ $C3.ai, Inc.(AI)$ $Salesforce.com(CRM)$ $SUPER MICRO COMPUTER INC(SMCI)$

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