{"id":14324,"date":"2023-05-26T17:13:15","date_gmt":"2023-05-26T21:13:15","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/embrace-momentum-stock-market-traders-learn-key-lesson-from-ai-tech-surge\/"},"modified":"2023-05-26T17:13:17","modified_gmt":"2023-05-26T21:13:17","slug":"embrace-momentum-stock-market-traders-learn-key-lesson-from-ai-tech-surge","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=14324","title":{"rendered":"\u2018Embrace momentum\u2019: Stock-market traders learn key lesson from AI tech surge"},"content":{"rendered":"
\n

A mind-blowing Thursday surge by shares of chip maker Nvidia Corp. that fed a frenzy for artificial-intelligence stock market plays reinforces a cardinal rule for traders, said a technician at a top Wall Street research firm.<\/p>\n

\u201cYesterday\u2019s move in NVDA was one for the record books,\u201d said Kevin Dempter, analyst at Renaissance Macro Research, in a Friday note. It also served as an example of the rule the firm preaches above all others, he said, which is to \u201c\u2018not fear momentum.\u2019\u201d<\/p>\n

\n

Shares of Nvidia
\n NVDA,
\n +2.54%<\/bg-quote>
\n jumped 24% Thursday, putting a $1 trillion valuation in sight, after it delivered a blowout earnings forecast centered on soaring demand for chips related to artificial-inteligence applications. That built on an already staggering upside run for the stock, which is up nearly 160% so far in 2023.<\/p>\n

Read:<\/strong> Nvidia stock is the most overbought in 18 months, but that doesn\u2019t mean the rally is over<\/p>\n

\u201cJust because a strong stock or sector is overbought after a big run doesn\u2019t mean you should sell it. Strength begets strength and the rich get richer, embrace momentum,\u201d Dempter wrote. (See chart below.)<\/p>\n

<\/p>\n
<\/p>\n<\/figure><\/div>\n

Nvidia shares added another 2.5% on Friday, while the megacap-tech-concentrated Nasdaq-100
\n NDX,
\n +2.58%<\/bg-quote>
\n logged a 3.4% weekly gain, up more than 30% for the year to date. The S&P 500
\n SPX,
\n +1.30%<\/bg-quote>
\n rose 1.3% Friday, turning positive on the week and up around 9.5% for the year. The Dow Jones Industrial Average
\n DJIA,
\n +1.00%<\/bg-quote>
\n bounced Friday, snapping a five-day losing streak but logging a 1% weekly fall.<\/p>\n

See: <\/strong>\u2018Unprecedented\u2019 and \u2018unfathomable.\u2019 Nvidia makes jaws drop on Wall Street as stock explodes higher.<\/p>\n

So should investors chase the rally? Not so fast there, either. <\/p>\n

Dempter said RenMac still wouldn\u2019t fade the move, but it might pay now to be patient and let overbought conditions get worked off before looking to add positions.<\/p>\n

He noted that the rally comes amid a list of understandable reasons for caution. The breadth \u2014 the number of stocks advancing versus declining \u2014 continues to weaken, with just 37% of the issues in the broad S&P 1500 index above their 200-day moving average and new 20-day lows outnumbering 20-day highs. The equal-weight measure of the S&P 500 recently witnessed a \u201cdark\u201d or \u201cdeath\u201d cross in which the 50-day moving average falls below the 200-day moving average.<\/p>\n

And the AI rally has some market watchers pondering if another bubble may be in the works.<\/p>\n

Fidelity\u2019s MSCI Information Technology ETF
\n FTEC,
\n +2.68%<\/bg-quote>,<\/span>
\n which allocates 23% to Apple,
\n AAPL,
\n +1.41%<\/bg-quote>
\n 19% to Microsoft
\n MSFT,
\n +2.14%<\/bg-quote>
\n and 6% to Nvidia was up by more than 3.5% Thursday, and 40% since last October 2022 dip. It currently trades 30 times the earnings, while the S&P500\u2019s price-to-earnings ratio is only around 22, noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note. She observed that Nvidia\u2019s P\/E ratio spiked to 219 Thursday.<\/p>\n

It all points to a \u201cbubble in the making\u201d for AI-related stocks, she said, warning that it \u201ccould soon be time for a correction.\u201d<\/p>\n

Dempter said that despite broader market concerns, \u201cwe still want to embrace those areas that are breaking out [with] momentum. It may be narrow, but we would remain overweight tech and would stick with the leaders while embracing improving trends in the sector,\u201d he said.<\/p>\n

It\u2019s hard to say how the AI boom will play out, but Dempter argued it\u2019s smart to stay long the names that have already benefited most.<\/p>\n

Need to Know: <\/strong>AI stocks are soaring but average investors aren\u2019t yet rushing in<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

A mind-blowing Thursday surge by shares of chip maker Nvidia Corp. that fed a frenzy for artificial-intelligence stock market plays reinforces a cardinal rule for traders, said a technician at a top Wall Street research firm. \u201cYesterday\u2019s move in NVDA was one for the record books,\u201d said Kevin Dempter, analyst at Renaissance Macro Research, in […]<\/p>\n","protected":false},"author":1,"featured_media":14325,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-14324","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n\u2018Embrace momentum\u2019: Stock-market traders learn key lesson from AI tech surge | iFintechWorld<\/title>\n<meta name=\"description\" content=\"A mind-blowing Thursday surge by shares of chip maker Nvidia Corp. that fed a 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