Want to know how to make money on Super Micro Computer ($SMCI)? I’ll show you! – August 7, 2024
Dan Fitzpatrick at StockMarketMentor.com. I’m going to show you how to not lose money on a day like today.
First, you’re looking at SMCI ( NASDAQ: SMCI ) here, and you can see what happened. This stock is down, now, more than 60 percent from the high. That is a nasty move in just a few months, 5 months, this is down. And you are definitely going to see a bunch of lines come up here real quick because I have all kinds of annotations here.
It made this kind of move, this kind of triangle pattern. This is what I’m talking about, it was down here. It came up here and you’re seeing higher lows, basically a flat top with a little bit of a downtrend here. The hope for something like this is that it breaks out of this volatility squeeze.
By the way, these are three standard deviation Bollinger Bands. I use them in volatile times because I want to know what the heck is going on. You can see, if we do the two standard deviations this is much tighter. Once this breaks out the bottom side, especially when the market is really imploding like this.
When it does that, you should not be buying this stock at all, not anywhere down here. In this volatile market I will start any position really, really light, and only if it starts rewarding me will I want to increase my exposure. You shouldn’t be buying this stock all the way down here. At the 50-day moving average, oh well, it’s going to hold the 50.
We don’t know that, we see it there. It held there, it didn’t really test it but sure it held there. Then it comes back down, and then what’s going to happen? It’s still holding here, I’ve got to buy this at the 50-day moving average. Here we go, look at this. I’ve got to buy it now. Well that didn’t work out too well, did it?
One of the reasons is, that when you are looking to buy a stock at support, you want to see three sides to a base. Sometimes it will just be a big V, but typically not. You want to see a left side, and hopefully, it’s more gradual. You want to see a left side, and that’s just the weak hand selling.
Then you want to see some kind of bottom of a base, which shows you that buyers are right here and they’re soaking up all the supply. Then once the stock, and if the stock, starts to run higher, this tells you that the supply that was here, there’s no more supply. So the buyers have to start buying if they want to continue to buy the stock. And if the stock continues to run higher, the only reason it does that is because people want to buy the stock.
That’s the logic behind having three sides to a base. A definitive left downtrend, a definitive bottom, and then a definitive start on the uptrend. That’s when it’s really safe to be buying SMCI ( NASDAQ: SMCI ) or a stock like this. And the reason is because you can have a tight stop right down here.
And you say, well, the whole reason I’m buying this is because I see the downdraft, I see the base, I see the move higher. Well, I don’t want to be in this stock if this turns out not to be the base. And so you can manage your risk that way. But if you are just buying a stock because you think it’s come down enough, that’s not why you want to be buying this stock.
We’ll see how this plays out. My suspicion is, we’ll get some kind of a rebound tomorrow. I still wouldn’t buy the stock. I mean, this stock is so far away from being bought, that it should just be off your radar, don’t even be looking at it. They’re splitting, I think they said a 10-for-1, and that’s fine. But it didn’t impact the stock price at all. Nobody’s buying stocks because they’re splitting anymore.
We see the same thing with Broadcom ( NASDAQ: AVGO ), they split 10-for-1 here and all that did was create more shares to sell. And so with SMCI ( NASDAQ: SMCI ), you can get all lathered up about it because they’re making stuff for AI and all that. And they’re a key player with NVIDIA ( NASDAQ: NVDA ), but I don’t care about that. I care about this stock being in an uptrend.
We’re still looking for a base, we’re actually just looking for a bottom. If we can find a bottom someplace, and then see the stock start to move sideways, then we can start looking at buying SMCI ( NASDAQ: SMCI ). The date is August 7, 2024, this stock will not be a good buy for probably months. Until then, it’s goodbye.
Just be patient on something like this. The market knows way more than we do. If a stock is down 60 percent, that should tell us something, right? So when you see something like this, just relax and go, you know what, I’ll let somebody else step out and buy at the bottom, I want to wait for my pattern.
I want to wait for some stock that shows me that it’s actually good to buy now because it’s moving higher. As opposed to, it’s actually good to buy now because it’s done moving lower. In the first part, where it’s moving higher, you make money. On the second one, oh, it’s done moving lower, you lose time. Maybe you’re buying at the bottom but you’re not making money.
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