Shares of Nvidia Corporation surged on Thursday, leading a craze in the artificial-intelligence stock market. A technician from Renaissance Macro Research, Kevin Dempter, said that this reinforces an important rule for traders. In a note on Friday, Dempter called Thursday’s move in NVDA a record-setting one and stated that it serves as an example of RenMac’s cardinal rule; “not fear momentum.”
Nvidia’s shares jumped 24% on Thursday, hitting $1 trillion valuation, after the company gave a tremendous earnings forecast and highlighted the increasing demand for AI-related chips. The rally built on the already astounding upside run for the stock, which is up almost 160% this year
While NVDA’s rally was impressive, Dempter suggests that investors hold on before adding positions. He noted that the rally comes amid a list of understandable reasons for caution, including the breadth of issues in the broad S&P 1500 index, which continues to weaken, new 20-day lows outpacing highs, and the equal-weight measure of the S&P 500 recently witneesing a “dark” or “death” cross in which the 50-day moving average falls below the 200-day moving average.
Despite broader market concerns, Dempter added, “we still want to embrace those areas that are breaking out [with] momentum. It may be narrow, but we would remain overweight tech and would stick with the leaders while embracing improving trends in the sector.”
Regarding the AI boom’s future, Dempter believes it’s a smart move to stay with the names that have benefited the most so far.