Looking for the Next Opportunity in AI’s Ongoing Boom

[Trading With Larry Benedict]( Looking for the Next Opportunity in AI’s Ongoing Boom By Larry Benedict, editor, Trading With Larry Benedict One of the AI plays we’ve been following this year is NXP Semiconductors (NXPI)… Like high-profile stocks in this space – such as Nvidia (NVDA) and Advanced Micro Devices (AMD) – NXPI has been riding the huge flow of money trying to capture the AI boom. But NXPI’s rally was initially more subdued… Only in May did its rally really start to take off. That rally is recently starting to soften despite a relatively upbeat earnings report last week. So today it’s time to see what’s coming next… Recommended Link [Can this expert trader’s One Ticker Retirement Plan jump-start your financial freedom?]( [image]( Market Wizard Larry Benedict crushed the market in 2022… He delivered a perfect track record to his One Ticker Trader readers, going 11-for-11. Previously, he went 20 straight years on Wall Street without a single losing year. And when the market plummeted 37% in 2008, he delivered 23% returns… Now he’s sharing an over-the-shoulder “demo” of his winning strategy in action. He calls it the One Ticker Retirement Plan… And it takes less than 10 seconds to demonstrate. [Watch it here.]( -- False Assumptions On the chart of NXPI below, you can see where it bottomed out in October last year (‘A’). That trough marked a 45% fall from its late-2021 all-time high: NXP Semiconductors (NXPI) [Image] Source: eSignal NXPI began to build a base and rally as the Relative Strength Index (RSI) rose higher (left red line) from oversold territory. As you can see, NXPI then began to develop into a classic uptrend with a series of higher lows (‘C’ and ‘E’) and higher highs (‘B’ and ‘D’). But NXPI’s retracement from ‘D’ to ‘E’ took about three times longer than the pullback from ‘B’ to ‘C.’ The RSI skirted around support/resistance. By the time that retracement finished at ‘E,’ NXPI was trading barely a couple of dollars above its January low. At the time, it would have been easy to assume that NXPI’s rally was dead. Yet as we saw when we checked in on NXPI back [on May 24]( (left red arrow), fresh momentum (right red line) was starting to push NXPI higher. Take another look: NXP Semiconductors (NXPI) [Image] Source: eSignal The next leg of NXPI’s rally developed in May. The RSI broke through resistance (green line) and into the upper half of its range, where it has remained throughout this current leg of NXPI’s rally. You can gauge the rally’s strength by the rate that the 10-day Moving Average (MA, red line) broke above the 50-day MA (blue line) and accelerated higher. When [we checked in on NXPI again]( (right red arrow) last month, that rally was still tracking strongly. But the RSI was testing an overbought level. And it was in danger of a reversal… Although NXPI did briefly retrace, fresh buying momentum again pushed NXPI higher. Now NXPI is trading within around 5% of its all-time high. So what am I looking for next? Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Growing Divergence As you can see on the chart, this past month, NXPI’s rally is starting to flatten out. Although NXPI surged higher after its mid-July dip, it is struggling to maintain upward momentum. That’s why the direction of the RSI will be key over the coming week (orange circle). If the RSI locks in a lower high and continues down, that will show a growing divergence between the stock price (upper orange line) and the RSI… meaning that NXPI could be due for a fall. We’d then look for our two MAs to move closer together as further evidence of a developing down move. Regards, Larry Benedict Editor, Trading With Larry Benedict Mailbag Where do you think AI stocks are heading from here? Send in your thoughts to feedback@opportunistictrader.com. And below, readers chime in on their recent S&P Trader experiences… For more about trading options spreads, you can go right [here](. I bit on the lifetime membership for The S&P Trader subscription. After three weeks, trading an account of about 100K, the subscription has paid for itself. Started with 1, then 2 spreads and am now holding at 3 spreads each time until I get a few more under my belt. Sometimes I am able to enter at a credit that is considerably greater than the minimum specified. It all gives me great hope – thank you! – Charles L. Hey, Larry, you always ask for some feedback, so here goes. I really like your weekly summaries. They are good reads. I started S&P Trader in March with 1 contract. Never traded spreads before, and didn’t know if I could keep up or not. But I did well, so 2nd week in June I started 2 contracts. Picked a bad week to start, but I’m good at doing that. Since then, I’ve made up for that week and overall am up over 11K since early March. I compare my results to yours in the summaries. Usually on 1-contract basis, I net about a point less than you. A couple of times I did better. I’m usually pretty quick making the trades, within 5 min or so, but sometimes a little longer. But prices change very quickly, so it’s no surprise I don’t get the same as you. No complaints with that. I’m doing better than expected. Also wanted to let you know I like your current strategy of less-risky trades. If there’s not much credit involved, it makes no sense to take much risk. Plus the market has been so crazy and unpredictable lately. I’m also doing Opportunistic Trader and haven’t had as much luck in that. I’m down quite a bit since March on that one. I've never had large positions, but last couple of months cut back to minimal ones and started using mental stops. If loss got to 50%, I dumped it. The mean reversion strategy just hasn’t been working lately. Hope you’re right about the trend changing. Keep up the good work! I’ve been very impressed with how the S&P Trader has done with spreads, enough so that I signed up the “elite” service a few weeks ago. – David S. IN CASE YOU MISSED IT… [Will YOU Turn In Your Cash?]( Will you turn in your cash? Soon, Americans may have a decision to make – Turn in your cash – or let it expire worthless. According to Dr. Nomi Prins, a pile of smoking-gun documents she’s unearthed, and patents prove we’re on the verge of a complete transformation of our money supply. She says: “The rules are about to change forever. 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