We had an unbelievable start to the year… then February sucked… and now we’re in sort of a no-man’s land where the market’s not really going anywhere.
You can’t force the market to be bullish, and you can’t force it to be bearish. So in times like this, we have to make sure we have an appropriate strategy that can play both sides — you have to fight with both hands, not one tied behind your back.
And there’s a trading fad that I’m getting nervous about… AI stocks. In this business of financial publishing, you’ll see newsletters and trading services go crazy about the latest, greatest investing fad about six months after the biggest moves have happened.
As Warren Buffett says, be greedy when others are fearful, and fearful when others are greedy… And I’m seeing a lot of greed in these AI names.
So to me, that’s often a sign of a top.
So let’s take a look at C3.ai Inc. (NYSE: AI), one of the more well-known enterprise AI companies that is exploding higher Friday after reporting better-than-expected earnings.
C3.ai reported a loss of 6 cents a share versus expectations of a 22-cent loss per share, and revenue of $66.7 million versus expectations of $64.2 million. And by lunchtime Friday on the East Coast, shares were up nearly 30%.
So this stock is, as they say, all the rage right now…
AI is all the rage now: $AI https://t.co/n6GYQDsgbV pic.twitter.com/B0g0qaFLoa
— The Transcript (@TheTranscript_) March 3, 2023
And here’s a big-picture look at its chart, including Friday’s massive rip higher…
So this stock’s around $27.50 after Friday’s move…
This is an example of pure hype, and stocks invariably come back to where they should be at…
And it should probably be somewhere around its moving averages, which means I’m not a buyer at these elevated levels.
To paraphrase what I said above about Buffett, when everyone else is all in, it might be time to take a step back.
Check out Crush the Open up top. Lance and I also discussed why this market is so hard to trade, and what we’re doing about it. We also covered why China stocks are so dangerous for anything more than just swing trades, a leveraged ETF I love to trade
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*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
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