The whole AI stack is moving

There has never been a time in the market when I knew what was going to happen next. I don't have any attachment to any opinions. We have to make decisions with incomplete information in real-time.

The great thing about trading is we can buy something with a stop loss and only risk what we feel comfortable with. If you aren't a big fund you don't have liquidity issues and that is one of the best advantages for us retail traders. We can be in and out as fast as we want.

This past week broke my expectations for now but it's important to be open minded.

Something I look for is decisive weekly candles. The candles the past 2 weeks on QQQ look decisive, big range off lows closing at highs of the week. Similar looking to prior bottoms like this time last year. These candles off lows look like the dip was bought aggressively instead of with hesitation.

The biggest development on QQQ is we broke and closed well above the 10-week. We also closed above the 30-week which if we stay above we should start to see ranges narrow over the next few weeks. But the 10-week is significant because that has been resistance for the past 8 weeks.

Looking at 2022 which I went over in last week's article, you could say the first rally attempt also felt decisive until it faded and made new lows.

I'm resharing 2022 just to keep open minded that if my expectations were broken last week then they can be again this week.

Every rally attempt feels convincing in real-time but theres some standout action the past week that leads me to believe pullbacks/weakness will be opportunities within a new uptrend.

Weak opens that close strong are a sign of a strong market.

1. Price action decoupling from news
2. Growth broadening and participation

1. Price decoupling from news

Even before the market gapped up on Wednesday, the previous week showed the first signs of starting to absorb the negative headlines. Any weak opens over headlines were bought up and closed strong.

The market gapped up on the "cease fire" news Wednesday, which nobody trusts. I didn't trust it either... and anybody really smart institutions that watched the back & forth, and remembers Tariffs probably didn't 100% trust it was over either.

That day the ceasefire was broken, and the rest of the week was filled with more negatives yet the market didn't budge. Now this weekend with bitcoins reaction to the "No deal" update its looking likely the market will open under pressure and have a stress test.

Weak opens -> strong closes are sign of a strong market.

• Can we close strong if we open under pressure?
• If so which stocks recovered first?

Another gap higher will not only make positioning harder but doesn't give the same data that you see in stress tests from answering above.

A lot of names such as 2 of my positions AMAT & TER broke to new highs. So the prior high will be what I'm interested in for them and the leaders over the next few days if the market does pullback. Retest and hold of prior all time high = strong.

2. Growth broadening and participation

One of the most important groups SMH broke out to new highs this week with a massive candle.

This is one of the most optimistic charts for me personally. We have many growth stocks semi-related within a clear theme AI Infrastructure that also broke out to new highs from proper bases.

It looks like Semi-conductors were really the only growth group to act so well last week on the surface but all of the strongest action last week had the same thing in common.... AI INFRASTRUCTURE.

The whole infra stack moved together this week:

Semiconductor equipment, memory, compute, fiber optics, power infrastructure.

To me the move on some of these names this week moving together look like the consensus is expecting AI Infrastructure spending to accelerate. Things can obviously change by the time I write this next week but it looks like broad rotation back in expecting the whole AI supply chain to still be in the early innings.

With the moves some of these stocks have had that is very hard to imagine I know, which is why I started this saying:

"The great thing about trading is we can buy something with a stop loss and only risk what we feel comfortable with. If you aren't a big fund you don't have liquidity issues and that is one of the best advantages for us retail traders. We can be in and out as fast as we want."

SNDK is a good example to keep in mind. Personally I hesitated to buy the base last December because it was already up 1000%. How much higher can it go?

Its since up another 300% since and showing no signs of stopping yet.

Any model book stock that has ran thousands of percent has always felt like it can't go any higher. But our job is to just understand its at highs because for now its being bought non stop... and that on its own is usually enough info to place a calculated stop even if we don't believe it.

I basically touched up on the themes above but some of my favorite stocks are broken down by theme below.

Space stocks are also very good looking and growth stocks that deserve attention. Not that is discounts it at all but the group feels separate from the overall AI Infra rotation and may be a momentum play ahead of SpaceX ipo.