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Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: Trader J who wrote (8283)	3/19/2024 2:35:27 PM
From: Sun Tzu	2 Recommendations Recommended By Sonali Trader J Respond to of 10521

I don't short NVDA because it is extremely rare for me to fight the tape. I've built a trading system that I think of as guardrails. Something has to first fall off the rails or bounce off of them before I take a position. When I fight the tape, it is almost always on the long side and for something that I would actually double down on if it were to drop another 30% - 50%. So no, I would never short NVDA or SMCI at this stage. And BTW, I do believe that NVDA will continue to have good sales for this quarter and perhaps next quarter (assuming they get commitments from Saudis and what not for AI DC builds). Before I go on, I want you to know that I absolutely believe in AI as a great development. This is one of the reasons why my CS masters thesis was on AI. I also have a degree in chip design. This is to say that I am not one of the luddites that you may have ran into. But what is likely to happen with NVDA is a combination of below: (1) The competition catches up. They don't have to surpass NVDA. It is sufficient for them build a cost competitive solution. MSFT, AMZN, GOOG, META, are all building their own AI chips. They will naturally want to deploy those chips in their cloud and promote them to their clients rather than NVDA's. INTC, AMD, and IBM are also building competitive chips. NVDA's advantage has been on the software side - specifically CUDA. But the industry is getting behind PyTorch. PyTorch is easier to setup and more functional, though not necessarily faster (not much slower either). NVDA won't be able to fight them all off. But what they are doing is selling professional services for setting up their own servers in order to reduce the PyTorch advantage of being easier to set up. (2) The industry will realize that AI in general, and AI chips in particular, are not all that is cracked up to be. Already Google and Amazon are gently lowering expectations. Not only the technology is far from the general public perception, much of the real world work cannot be parallelized. This creates a bottleneck and will be part of the disappointment. (3) Most importantly, there is a big difference between the stock and industry/economy. The internet delivered more than what its staunchest supporters promised. But none of the first gen and few of the 2nd gen internet companies hit their dot come highs and most did not lived long enough to see the internet succeed. There is no reason to believe it will be any different with AI. As a recent example, working from home is very much the norm these days. But ZM is nowhere near its highs even though it is making more money than it did in 2020. An oft sited dot com example is CSCO. They are selling far greater number of routers than they did 25 years ago. But their stock is nowhere near that price. So even if NVDA manages to keep its leadership, it is unlikely that their stock price will be higher 5 years from now. I have no intention of shorting NVDA today to buy it back lower in 5 years. There are better uses for the money. But at some point it will fall off the guardrails, and then I will likely begin to accumulate NVDS. PS If NVDA closes below 840 (this week or next), then it is likely to go to ~700. Even then it will still be in a healthy uptrend. But under this hypothetical situation, I may short it and cover or even go long once it builds a base.

To: Trader J who wrote (8283)	3/19/2024 6:13:42 PM
From: Sun Tzu	1 Recommendation Recommended By Sonali Read Replies (1) \| Respond to of 10521

Here's the guardrail system at work for NVDA. The basic idea is that things bounce between the green line and red line (with the blue line as an intermediate target), until the stock goes off one side of the rails. From that point on the trend is whatever rail it went off of with acceptable deviations up to the trend line (the grey line where the green/red highlights end). In the first chart below you see how NVDA bounced off the green to the red to blue and back to the red. In the 2nd chart you see the same thing happening in a narrower range, but then NVDA breaks above the red line changes from ranging to trending. As we stand now, we have a consolidation in an upward trend. IF it breaks below the range, then I expect it to come down to the blue line. The calculations are dynamic, so the targets change everyday. BTW, I do care about the fundamentals. But they need to be aligned with the technicals. Chart 1 NVDA Ranging Chart 2 NVDA Trending

To: Trader J who wrote (8283)	4/19/2024 7:29:46 PM
From: Sun Tzu	1 Recommendation Recommended By Lou Weed Read Replies (1) \| Respond to of 10521

Let's revisit NVDA and SMCI. Firstly, I hope that you are doing well and that you did not suffer much today. If you had stop losses in place, they should have kicked in well before today. If you didn't, I think that NVDA is due for a bounce or at worst will close the gap from February 1st before bouncing. Nothing has changed my mind since we last spoke. NVDA is still a great company and I am pretty certain they will beat their numbers again this quarter. And I also still think that they will see their multi-year high within 18 months, if it has not already peaked. It's no secret that I've been heavily shorting NVDA over the last few weeks. What changed? It fell off my guardrails and my money flow indicators gave a bearish signal (see the chart below). I shorted where you see that vertical bar which was two days after the bearish signal in my bottom indicators, but imo was the safer entry b/c NVDA has a lot of BTFD crowd. Even so, it tried my patience b/c until today it did not fall as fast and as hard as any other stock in this situation would have. And despite the algo's recommendation to the contrary, I did not cover any short positions but did add 5 tranches as it fell. The latest got triggered this morning soon after the open. My shorting vehicle was NVD (-2x ETF). As to SMCI, it has the dubious honor of being the worst performer in my watchlist. The market sees to agree with me on it being far riskier than NVDA. Nonetheless I never touched it b/c as I said, it is not my kind of stock to be long or short. Though in hindsight, I should have bought some 0DTE puts. But SMCI just wasn't on my mind. Again, if you are holding NVDA, chances are good that you will be able to recover all or most of your losses this quarter. Below are my NVDA chart with the guardrails, and two SMCI charts: one with the guardrails, and the other with fib retracements pegged to when it became very popular. Have a great weekend. NVDA . . SMCI .