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Chips stock report may 24

Chips are in control

Nick Schmidt

Last week we were watching for a pause or pullback. Friday-Tuesday were not fun, a lot of the big movers of this trend definitely pulled back, but they were all quickly supported by major levels. Most stocks had a constructive pullback to the 4-week and bounced.

The overall action in leading stocks was incredibly constructive.

When you zoom out although those 3 days were not easy in real-time, it was nothing compared to the moves higher the leading stocks have had the past 7 weeks. Well deserved pullback, and impressively supported.

Although Semis are the top dogs, last week we saw back to back high participation days. Lots of stocks moved higher. Last week we were discussing how participation was lackluster outside of semis. Its not on its own a sign the market is going to go up or down.... but its always a positive to see back to back broad breadth.

The strongest stocks are all related to AI infrastructure. Everything related to compute and chips. The report from April 12th "The whole AI stack is moving" continues to be true almost 2 months later.

Foundries & Semicap / SMH$576.32
Foundries & Semicap
MA4W·10W·30W

THE group to focus on. Historical move higher.... was barely able to pull back or rest before more buyers stepped in.

Software / IGV$94.01
Software
MA4W·10W·30W

Continue to see good action and rotation into software. The biggest standout here is the amount of stocks that surprised on earnings and gapped higher into fresh new trends.

One of my favorite fundamentals to look for is 3 quarters accelerating sales. A lot of these names with this are in Software. DOCN DDOG BB FTNT CRWD.

Neoclouds / WGMI$61.93
Neoclouds
MA4W·10W·30W

Neocloud group breaking out to new highs just as many of the neoclouds are also coming up the right sides of their base (stocks below)

My Focus

5 charts
TSLA$426.01
Robotics
MA4W·10W·30W
6 year base. The past 2 breakout attempts have failed, but each time has made a higher low. Price is tightening up each time it attempts the breakout again. We are here again after the 3rd higher low, and trading 3 weeks tight.

Below I have another close up view of the action as well as a video overview of exactly what I see here.
6mo view
You can see zoomed in here the 3 week tight closes. Close above $430 or pullback towards $400 again.
Open on YouTube
TER$358.44
Foundries & Semicap
MA4W·10W·30W
TER had a big candle with a lower wick after earnings but it closed on the base pivot. Small sign of structure and potentially a shakeout vs distribution.

Past 3 weeks have been very tight and on the same base pivot.

This is what I would consider very controlled action which makes me believe earnings week was the shakeout and its more likely to go higher.

The past 3 weeks it never undercut the low of that earnings candle = subtle sign of strength.
CLS$367.37
AI Hyperscalers
MA4W·10W·30W
This was a top focus a few weeks ago as it broke out of a multi-month base. Since then it has lagged but its acting very organized and respecting structure. It shook out and closed on the base pivot showing its acting as support. The 10-week has also caught up here to price so we have a confluence of support similar to KLAC last week.
AVGO$414.14
AI Networking Silicon
MA4W·10W·30W
Resistance -> support. Similar look to KLAC. This is in the same subtheme as ALAB CRDO

Notable Charts

10 charts
AI Networking Silicon
Powerful moves last week in ALAB CRDO not a coincidence. Big money seeing rotating into this sub theme. AVGO lagging the group but chart is clean and looks ready.
ALAB$306.88
AI Networking Silicon
MA4W·10W·30W
Strong action!
Foundries & Semicap
ASML$1632.90
Foundries & Semicap
MA4W·10W·30W
This is a big semi name that just broke out, retested, and followed through of a proper base. Also a current position. Textbook action.... good sign for market.
LRCX$305.35
Foundries & Semicap
MA4W·10W·30W
Another beautiful display of structure. Break out -> 3 weeks tight holding prior pivot as support -> breakout -> trade tight push off the 10-week to new highs. Good for market and group.
Materials
MP$64.46
Materials
MA4W·10W·30W
Higher low last week. Potentially coming up the right side of the base. Close above $70 should bring in momentum. Quiet week or pullback respecting the higher low could also offer a better early entry.
Neoclouds
This group has been the top group outside of semis. NBIS is the clear leader. Other names in the group came around this week and all setting up.
NBIS$214.77
Neoclouds
MA4W·10W·30W
Leader of the pack. Got in on the 4-week pullback. Working so far.
CIFR$21.97
Neoclouds
MA4W·10W·30W
Higher lows coming up right side here. Potential official breakout this week.
APLD$45.87
Neoclouds
MA4W·10W·30W
Big base breakout and retest. Beautiful chart. 3 Quarters of sales acceleration.
Software
We continue to see rotation into Software which is a good growth group to see rotation into. We have seen multiple names in this group gap up big on great earnings starting new stage 2 uptrends.
TWLO$187.88
Software
MA4W·10W·30W
This is one of the big recent earnings gaps software leaders. It has remained in this range for 3 weeks giving a clear upper & lower level to watch. If I wanted to get in here I'd prefer to watch and use $180 level to manage risk vs waiting until it breaks out of this range.
DDOG$222.32
Software
MA4W·10W·30W
If this came back and retests the $200 level successfully I would make it a focus. Doesn't look like its coming back though.

3 Quarters of sales acceleration.
Power & Grid
SOLS$81.76
Power & Grid
MA4W·10W·30W
This stock has been pretty ugly action day to day but its just been digesting above prior resistance. I bet it gets going soon.