Market Milestones: Saucy Dips

Overall, this week has been a bit of a snooze fest in the markets. The SPY has stayed inside its Monday candle as it takes its sweet time deciding on which direction it will head in the short term. The semiconductors are taking a breather for a while, as we discussed last week, and MU gapped down on Thursday, adding to the weakness. The standout names among the tech giants are AMZN, TSLA, and GOOGL, which saw some very solid bullish action while the markets stood still.

While some of the most dominant AI names are selling off, the market remains relatively stable due to rotation. I don’t mean rotation into small caps, which clearly is not happening. I mean the steady rotation of the tech giants as they take turns hitting all-time highs and breaking out. The question becomes, when does money rotate back into the beaten-down chip stocks. Trust me, I know calling a stock that pulled back 16% beaten down is completely insane, but that is the world NVDA has created for us. If NVDA, AVGO, QCOM, and MU can take one more nice leg lower, they will be 20%+ off of their all-time highs and offer some nice risk-reward on great companies.

NVDA

The 100DSMA is about 19% lower on SMH, the VanEck semiconductor ETF. It would take a lot of selling for it to get down there considering how far away it is right now. However, if NVDA, its biggest component, gets back down to its 100DSMA around $94.00, that would likely have SMH back into its 100DSMA and lower trend line.

All four of the stocks listed above look amazing, are in bull trends, and are big players in the AI space. Of those four, AVGO may be the prettiest technical setup due to the rock-solid support level around $1,200.00. Every time an entry is set up, there should be a stop or protection level built into the trade. It doesn’t get much clearer cut than the $1,200.00 support on AVGO. Not only is it an amazing horizontal price support, but it also lines up with the 200DSMA, a moving average AVGO has not touched since December 2022. If AVGO breaks below and closes under the 200DSMA, things could get a bit gnarly as the next solid support is in the low $900.00 area. You may be saying to yourself, “$1,200.00 per share! That's a little rich for my blood.” To that, I would say two things: first, you can always buy just one share; and second, on July 15th it is having a 10:1 stock split, meaning that the $1,200.00 support will be at $120.00 support. Hurray for stock splits!

AVGO

While AI names look like they are experiencing a nice buyable correction, big daddy bitcoin seems to be in the same boat. Bitcoin made a new all-time high on March 14th and has been consolidating and chopping sideways for the last 107 days. By my count it’s either in a larger degree 4th wave with one more move higher to come for its final 5th wave or it’s in the 4th wave of its 3rd wave, meaning it will have two more nice pushes higher. Either way, the large overarching structure of bitcoin still seems to be bullish. If bitcoin breaks below the pivot formed on May 1st, fear will spike, and charts calling for a double top will proliferate. That breakdown seems like the perfect bear trap into a pocket of liquidity. From an Elliot wave perspective another move lower would be a very standard and normal flat correction. I will pick up a Satoshi or two at all 5’s, if it gets down there, especially if it does it with bullish RSI divergence.

BTCUSD