Is There More Room to Rally?

Dear Traders,

This week, we are set to receive tons of important inflation data. Also as we are one week out from the next Fed meeting, I expect to see some extreme volatility in large-cap tech stocks as the rollercoaster continues.

AI darling Nvidia soared to a record high last week, but the main question remains, is there a bubble? Or is there more room to rally for SPY, VOO, or Nasdaq QQQ?

These massive recent moves caught everyone by surprise, and many are still scratching their heads. Expert Michel A. Gayed has been warning that NVDA is overvalued since it was trading at $250. Now it’s nearly $1,000. The main question is whether these are bubble prices or not.

According to some analysts, the answer is no. I recently read in Bloomberg that, according to JP Morgan and Goldman Sachs’ analysts, the magnificent seven stocks (Apple, Microsoft, Google’s parent Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla) are currently trading lower relative to the rest of the S&P 500 than the average of the past five years.

Yes, there is concern over the very strong performance of the Magnificent 7, but the group is currently trading less stretched than a few years ago, to their given earnings delivery. This does not mean that the group is immune to profit disappointments ahead, but in the case of general earnings disappointment, these stocks could still perform better than traditional cyclicals reliant on the economy’s strength.

However, not all Magnificent Seven are doing well. Apple shares entered a technical correction this month amid concerns about the company’s slumping iPhone sales and regulatory pressures. Tesla shares are also in a downward spiral, and it seems until China recovers, they may trade below $200 in a range between $160 to $180 per share.

So, there is more room to rally for sure, at least according to some analysts. Gold is pushing toward another record as traders are set to parse the US inflation print tomorrow. And Bitcoin continued its surge, topping $71,800.

On Sunday evening pre-market trading on some apps, the 3rd largest company just went from being down 6% to up 3% and back down 2% in 5 hours. Even as markets are closed, some 24-hour brokerage platforms are seeing massive swings in $NVDA. That’s a swing of over $300 billion in market cap on a Sunday night.

If you include the reversal of Friday’s high, that’s an 18% drawdown in less than 2 trading days. NVDA is now more volatile than most meme stocks and cryptocurrencies. This stock truly is one of a kind.

But for us active traders, day trading volatility is perfect, and it is easy to see 4-5% moves these days. Just today we had a 15% move on MARA and a 5% move on TSLA alone. Today I had a big loss on MARA and AMD but managed to catch a nice rebound trade from TSLA and NVDA. Overall, my recap was a roller coaster of ups and downs, but there is some information for you to watch and learn from it.

If you have any questions about the recap, let me know in the comments!

This week’s presentations are important. Tonight is the onboarding class for all new traders by Carlos. For Tuesday, Thor´s webinar is about the fundamental concepts of trade evaluation for trading success. And on Wednesday, we have Jared Tendler, one of my favorite coaches, to present for our Psychology Wednesday webinars.

For the full list of our webinars, please check out this page.

I will be traveling to Europe this Wednesday and won’t be trading for 5 days. Lenny, one of our best traders in Peak Capital Trading, is trading the Open with Brian. He has been a great trader and has a great course on 5-minute Opening Break Out. The top trader at PCT, who will win the $10,000 PCT trading challenge, actually worked with Lenny.

So, you are in for a treat trading with Lenny at the Open, and I hope you enjoy it.

I will be in the Alps skiing for one week, but I hope to get into the trading room and make some scalps!

To your success,
Andrew