Benzinga - by The Arora Report, Benzinga Contributor.
To gain an edge, this is what you need to know today.
Artificial Intelligence Change You Need To Know Please click here for a chart of Palantir Technologies Inc (NYSE: PLTR).
Note the following:
- This article is about the big picture, not an individual stock. The chart of PLTR stock is being used to illustrate the point.
- One of the keys to The Arora Report’s successful strategy is identifying change early. Those investors who identify a change early always come out ahead. The premise behind the ZYX Change Method is that the most profits are generated with the lowest risk by successfully predicting change before the crowd.
- The chart shows that PLTR, a popular artificial intelligence stock, ran up going into earnings.
- The chart shows that the move up yesterday was on heavy volume. There is a large group of investors in the stock market that follow only traditional technical analysis and has no comprehension that traditional technical analysis no longer works as well as it used to. Please click here to see the reasons. In traditional technical analysis, volume means confirmation.
- The chart shows that the move up yesterday was on high volume.
- The buying yesterday was mostly by the momo crowd on hopium and by the followers of traditional technical analysis on volume confirmation.
- The chart shows a big drop after earnings. It is a reminder that earnings are always a risk event. Results can be in either direction. It is also important to know that the momo crowd always buys ahead of earnings on hopium.
- PLTR reported great earnings. Here are the details:
- PLTR reported revenues of $634M vs. $615M consensus. The revenues are up 21% from a year ago.
- The company reported adjusted operating income of $226M vs. $200M consensus.
- PLTR was originally focused on government and defense business but is now increasingly capturing commercial business.
- PLTR generated commercial revenue of $299M vs. $292M consensus. This represents a 27% increase from the prior.
- The government revenue came at $335M vs. $322M consensus. This represents a growth of 16%.
- The company is very upbeat, and commentary about the future is very positive.
- The company is guiding full year revenue to $2.677B - $2.689B vs. the prior range of $2.652B - $2.668B.
- PLTR stock is being hit for two reasons:
- It is an expensive stock. If it was not for the momo crowd, the stock would have been trading much lower in the first place. The drop in the stock shows that now at least some investors are paying attention to valuation and are willing to take on the momo crowd.
- As good as earnings and projections are, there is deceleration in commercial business growth. This shows that prudent investors who dig into the details of the hard numbers, especially growth, are willing to take advantage of the strength in AI stocks and sell.
- The drop in PLTR stock represents for the first time a new change in how smart money is now willing to take on the momo crowd.
- Another important observation for prudent investors today is on NVIDIA Corp (NASDAQ: NVDA). Here again, just like Palantir, a change is underway. This morning, there was an upgrade by a major Wall Street bank, but the stock is falling in the pre market. The reason is that those in the know were buying yesterday on the hopes of selling today to the segment of the momo crowd that depends on free media. This is the first time this commonplace phenomenon is coming to the premium AI stock – King Nvidia. A famous investor who is part of smart money recently reduced his stake in NVDA stock. Prudent investors need to remember that once the mania phase is over, the segment of the momo crowd that depends on free media often becomes the fodder for smarter players.
- As full disclosure, NVDA and PLTR are both in ZYX Buy by The Arora Report.
- Among earnings of note, Walt Disney Co (NYSE: DIS) is falling on earnings. Whisper numbers had ratcheted up going into earnings. Earnings are good but are less than whisper numbers. As full disclosure, The Arora Report has given a signal on Disney with a buy zone, recommended quantity, and target zone.
In the early trade, money flows are neutral in Amazon.com, Inc. (NASDAQ: AMZN).
In the early trade, money flows are negative in Meta Platforms Inc (NASDAQ: META), Microsoft Corp (NASDAQ: MSFT), NVDA, and Tesla Inc (NASDAQ: TSLA).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is buying stocks in the early trade. Smart money is inactive in the early trade.
Gold The momo crowd is buying gold in the early trade. Smart money is inactive in the early trade.
For longer-term, please see gold and silver ratings.
The most popular ETF for gold is SPDR Gold Trust (ARCA:GLD). The most popular ETF for silver is iShares Silver Trust (ARCA:SLV).
Oil Oil is volatile on conflicting reports from the Middle East.
The momo crowd is like a yoyo in the early trade. Smart money is inactive in the early trade.
For longer-term, please see oil ratings.
The most popular ETF for oil is United States Oil ETF (ARCA:USO).
Bitcoin Bitcoin (CRYPTO: BTC) is range bound.
Protection Band And What To Do Now It is important for investors to look ahead and not in the rearview mirror.
Consider continuing to hold good, very long term, existing positions. Based on individual risk preference, consider a protection band consisting of cash or Treasury bills or short-term tactical trades as well as short to medium term hedges and short term hedges. This is a good way to protect yourself and participate in the upside at the same time.
You can determine your protection bands by adding cash to hedges. The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive. If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.
It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash. When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks. High beta stocks are the ones that move more than the market.
Traditional 60/40 Portfolio Probability based risk reward adjusted for inflation does not favor long duration strategic bond allocation at this time.
Those who want to stick to traditional 60% allocation to stocks and 40% to bonds may consider focusing on only high quality bonds and bonds of seven year duration or less. Those willing to bring sophistication to their investing may consider using bond ETFs as tactical positions and not strategic positions at this time.
The Arora Report is known for its accurate calls. The Arora Report correctly called the big artificial intelligence rally before anyone else, the new bull market of 2023, the bear market of 2022, new stock market highs right after the virus low in 2020, the virus drop in 2020, the DJIA rally to 30,000 when it was trading at 16,000, the start of a mega bull market in 2009, and the financial crash of 2008. Please click here to sign up for a free forever Generate Wealth Newsletter.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
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