Here’s my take on the action in $SMCI – February 16, 2024
This is Dan Fitzpatrick with your Chart of the Day. We’ll talk about the big elephant in the room, the elephant tipped over today.
I want to go into just a little bit of detail here. We’ve been trading this all along, this was an NVIDIA ( NASDAQ: NVDA ) related play, GPU, Cloud Storage, they’re the big dog in that industry. NVIDIA ( NASDAQ: NVDA ), SMCI Cloud Storage ( NASDAQ: SMCI ), and a huge market in the GPUs.
We’ve been looking at this for a while, and the breakout buy point I had said was right here. We were looking at that on the 9th, right here when the stock broke out. You see the stock doing this, and NVIDIA ( NASDAQ: NVDA ) was acting pretty frisky at the same time, this broke out on the 8th.
So this ( NASDAQ: NVDA ) broke out on the 8th. SMCI ( NASDAQ: SMCI ), this is what this was doing on the 8th, coming right up to that level. And then the next day this broke out, and then it pulled back a bit below the breakout level but still held the breakout pretty well. You are, a lot of times, going to get a little undercutting but this was not a big deal.
Then the stock starts running again and you’re off to the races. If you look and see what the volume is on this stuff, the volume is massive. When you see that, you’ve got to know that parabola is starting to foster a parabolic move that is ultimately going to lead to a blow-off top. They don’t happen that often, but when you see one you will always remember it.
There was one way back in the day, right here on Tilray ( NASDAQ: TLRY ), you see the same kind of thing here. Everybody is all potted out, we’re all going to make money on pot, and I’m sure some people are. But this was another one, it went from 20.00 up to almost 70.00 in 8 trading days. You just knew that this was going to come to a bad end, and it did the very next day.
Then we looked at SMCI ( NASDAQ: SMCI ), you had to expect that this was going to come, we just didn’t know when it was going to come. And so today, when you look at this on my 4-time frame thing, you could see right away, that this was different. Right away, the first half an hour, the first 15 minutes of the day, this peaked and then it started to sell off. If you were really aware of what was going on you would have sold maybe before that.
What I suggest doing is, on a stock like this because you don’t know how far it’s going to go, I say that you start taking profits here and there, taking them along the way, just as a function of discipline and risk management. But then, decide how many shares, maybe it’s 1, maybe it’s 1,000, depending on what your metric is, you hold a small position.
And your idea is this, I don’t know how high this is going to go, but I’m going to keep this small position. And when the stock reverses, not if, but when the stock reverses I’m probably going to be chasing it down. And I’m probably going to wish that I had sold it yesterday. But it’s a small position and so I will take that risk because I don’t know when yesterday is going to come.
I don’t know if yesterday is today, or if it’s a week from today. In other words, when is the stock actually going to reverse? I want to hang on until the last minute, on this last little chunk, on the last little bit of shares. And if that’s the case, then when the stock is doing this you just go, okay, I’m out of here, and then you sell. That’s the way I look at this now.
If you are still holding SMCI ( NASDAQ: SMCI ) now, then you may want to go down to the local supermarket and apply for a job at the cashier because you are a bag holder, no question about it. This stock is not going up from here. I’m not saying that it’s going to go down more. It seems like it would, that would be my bet, but I’m not a betting guy.
I would say that this trade is over. It is only down 17 percent on the day, which, all things considered, is really not bad. I think that even though it’s down like this, I think it’s still not too late to sell the stock, But you should not have a big position in this stock. If you did and if you do, shame on you. I don’t mean that in a bad way, I’m just saying you knew this was going to happen and it did happen.
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