SMCI Chart Analysis

[PuddinHead42]

@buynholdisdead asked what IBD had to say about SMCI, here is my response…

Remember that IBD does not make specific buy and sell recommendations. They talk about stocks that are setting up or breaking out, and they will remind us of the sell rules when they apply, but they don’t send out “buy now” or “sell now” notices.

So let’s see what the charts say. First, look at the rankings in that top left box. Very, very strong IBD rankings, just what you are looking for. (99 means it is better than 99% of the stocks). Down in the bottom right the box shows great earnings and sales growth at the last earnings report. CANSLIM/IBD prefer a lot more of them to show up consecutively, but it looks like street consensus for earnings is to grow 89% in 2024.

Not long ago, I drew that downward trendline and made it an alert. The recent support at the 50dma and a crossing of that trendline would be very positive. Also not that the volume during the recent decline was declining, indicating less of a desire to sell. Yesterday, the price jumped above the trendline on volume slightly higher than recent volume. I decided not to buy because the market has become so weak. I thought I would wait until today and decide. Today (2PM), the price has faded below the trendline and the market has continued to be bad. In fact, if the market vol on Naz and S&P are up today, I believe IBD will change status from “Market Under Pressure” to “Market In Correction”. (Per IBD “rules”, the market status and feedback on my holdings has cause me to cut the majority of my IBD holdings over the last week).

4/16: IBD: “Super Micro stock soared 10.8% to 976.30, retaking the 50-day and 21-day lines and touching a downward-sloping trendline. Loop Capital hiked its SMCI stock price target to 1,500 from 1,000.

Investors could buy the AI server maker here for an early entry or wait for a move above Tuesday’s high. Super Micro stock is on track to have a base with a 1,229 buy point after this week.

Super Micro earnings are due on April 30, but often releases preliminary results a week or two before full financials.”

With its strong ratings and RS of 99 and recent support at the 50dma, this is definitely a stock to watch. Institutions are clearly not dumping it.

[buynholdisdead]

Thanks Pete I really appreciate that. I can see where your charts are a big help to you. Do you use them for long term investing or trading, or following the IBD method exclusively? I am just trying to understand how you are using them.

Andy

[PuddinHead42]

@buynholdisdead Andy, As I just posted in another thread, I have been interested in the IBD approach for years. Around 2000, I started getting the IBD daily second hand from my neighbor on the weekend (no real internet back then). I didn’t put much effort in it and my interest faded. I came back to it on and off over the years. Now that I am retired, I thought I would try to get serious about it, including shelling out for the MarketSurge charting tool which I find invaluable. As a retiree, I have about15-18%% of my money in dividend payers. The vast majority of my money in is in Motley Fool growth stocks I started buying around 2015 when I gained control of the 401k from my company and could buy individual stocks. That was great in 2020-2021, but kind of hurt in 2022, now I am back in the very comfortable zone by hanging on for the long term. So, my IBD funds are in a separate account for easy tracking and they are a small part of my assets. But if I can convince myself I am successfully implementing the rules, especially the sell rules, then I will be willing to move more and more into that account. FYI, my “Saul Shadow” account is about 30% the size of my IBD account.

Long-term or short-term? Well, that depends on what happens. One of the goals of CANSLIM is to find a life-changing stock and properly pyramid in and properly hold. Most trades can be fully or partially cashed out around 20-25% gains or 7-8% losses. (can discuss more sometime).

I have mentioned my one life-changing stock I got via this system. Back in 2016 I was trying the system again and came across NVDA. It had great fundamentals and was showing professional accumulation. It was mostly a Graphic Chip company for gamers at the time, but was growing. I bought in on the breakout in March 2016, shown by my red arrow. Split adjusted, it was about $8 per share.

You can see that for the longest time, it gave no reason to sell at all, so that was becoming a long-term stock for me. It had great support at the 21dma (green) and a couple times at the 50dma. It was not until it hit $120 (about 4x) and then fell below $100 that I began to worry. I thought it would be wise to sell 2/3rds of my stock and buy it back lower. Lower did not come, but I traded a little, but in the end, ended up with only 1/3rd of my original buy. If I had been serious about the system, I would have known that Bill says that when a stock has a huge gain like that, you need to give it lots of leeway. This area of turbulence was not a climax top to be sold. Anyway, I still have my remaining shares and part of that is because MF convinced me it still had a great future. After the recent decline of that top, I am sitting on a 104-bagger, but at the peak it was a 118-bagger.

I am sure you are aware of David Gardner’s term Spiffy Pop. If anyone doesn’t, it means the price of the stock goes up by at least your purchase price in a single day. Once you hit at 100+ bagger, a 1% day means you have doubled your initial purchase price that day. Pretty cool.

Sorry to everyone about continuing to brag about this example. Just remember is pales in comparison to @Quillnpenn turning $50k into $12million in 10 years or so. Maybe I need to learn that system.

[PuddinHead42]

Super Micro Computer (SMCI) stock plunged Friday after the data-center computer specialist announced the date for its next quarterly earnings report without giving preliminary results. SMCI stock plunged below a key support level on the news, flashing a huge sell signal.

[buynholdisdead]

I wonder if it is going to fill that gap back on 2/21. I have been waiting on a sell off of this stock. Sold 3/4 at around 972.

Andy

[PuddinHead42]

@buynholdisdead that was a tiny gap, I would not assign too much significance to it. I think a trip to the 200dma is more likely than a bounce after closing that gap.

[buynholdisdead]

That would be a huge drop Puddin, down to the 500 dollar range. I wouldn’t mind that.

Andy

[PuddinHead42]

@buynholdisdead Andy, This is the link to the IBD Friday video review with Mike Webster.

Bull Market Precedent Breaks Wide Open; Nvidia, SMCI Plunge | Stock Market Today (youtube.com)

At the 25 minute mark, he goes over the NVDA chart. At the 33:55 market he goes over SMCI. Very worthwhile watching. (timestamps may vary by a few seconds on YouTube vs IBD webpage.

My Show Notes…
• Timestamp 25:26 – looking at NVDA.
• Bill always said to watch the leading stocks for clues, and NVDA is THE leading stock right now. NVDA is below 50dma and was down 10% today, this is a big flag saying “Be defensive”.

• If this was going to be a successful stock was going to be ok, then yesterday’s support at the 50dma should have held. It was the first pullback to 50dma and 10-week and that is NORMAL. But today was not normal. Our expectation is a strong stock will hold the first pullback, but now we have another expectation breaker to make us defensive.

• 29:15: talks about how he uses the RS moving averages to make a sell decision on a stock with a low basis, in this case NVDA at $500/sh. (really worth listening to). (focuses on the weekly charts)

• 33:55 SMCI review: Mike has been saying this was similar to the old Tazer (now Axon) moves. It is typical for great stock runs to have big reversals and survive them. Mike was seeing support at the 50dma and was trying to get in for a run back above $1000, but Thursday it went below the 50dma, which broke the precedent with Tazer and he got out. That kept him out of this 23% drop on Friday. The chart pattern was showing a head-and-shoulders, which likely brought in shorts that started shorting it at $1000, and then kept pressing hard today (Friday). Mike says he is don’t watching this stock for a while. He could be fine getting back in “months from now”.

[buynholdisdead]

Thanks Puddin I appreciate that. Thanks for the help.

Andy

[Quillnpenn]

re: SPY
since 3/13/23 you may have had 9 out 9 successful trades - Last sell at the Finish line waz 4/1/2023 and an OUt of the Gage was 4/22/23.

Notice this chart is Silent. no noise, no chatter. Decisions are made within a blink of an eye either at 10 am or 3:30 pm daily per the two (2) simple rules.

I don’t own SPY but own NVDA, META notice at 12/07 to buy out of the gate as whento buy. COST. etc. etc.

had a buy signal today with COST.

Quill -

[Quillnpenn]

re: SPY,NVDA, COST

re: HA smoothie charts.

Shhhhhhhhh pretend we are in a library. No noice , no chatter. The chart speaks volumes. Compare the top panel to the middle and bottom chart panels. .

Impossibe to blow it. Shhhhhhhh look with your eyze. This is a test for Sixth (6th) graders according to Simon Sez two (2) simple rules.

Purple dashes are profit Target.

Notice the ARC’s or smiley or frown faces. Buy or Sell after the ARC’s.

Now you tell me if you ccan’t make a few shekles at every Finish line.

Credit goes to Charlie and his simplistc charts and wisdom.

Quill -

[Arindam]

Quill,

If you want ‘simple’, take a look at this chart for NVDA where the top panel compares NVDA’s performance against the broad market and the main panel attempts to show the current, 1-month trend.

Here’s a second chart whose purpose is to suggest some of the essential trading details, such as ‘volume’, where prices actually are (as opposed to a smoothed HA plot), and what a single indicator (Chef’s Choice) might be saying.

The first chart says that NVDA’s current trend is ‘down’, but might be ready to reverse. (Note the green bar for today.) The second chart says that a possible reversal began yesterday, confirmed by today’s open. But that kind of breakout is hard to anticipate or to set up for. Also, it has to be asked how much of NVDAs price action is simply due to price action in the broad market vs NVDA’s specifics? Hence, why not just trade a leveraged version of the broad market, given that the rally is phony and unsustainable.

Explanation: The US is $35 trillion in debt and just voted gleefully over the weekend to borrow and spend another $95 billion on its foreign follies. Small wonder the $US is rolling over, again.

Charlie