After Nvidia CEO Slams Quantum Computing, Rally Could Be Next
Things got ugly for the sector after Jensen Huang commented on the technology and action today could set up a rally next week.
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Google GOOGL giveth and Nvidia NVDA taketh away.
A month ago, Google introduced its quantum chip to the world. This sparked a rally in almost every name related to quantum computing, with some small-cap quantum and cybersecurity stocks doubling, tripling or skyrocketing multiples more than that.
Then Jensen Huang happened.
This week, while speaking at CES, he slammed quantum computing. His estimate that commercial quantum computing is two decades away sent quantum names plummeting.
On Wednesday, many of the sector's biggest December winners dropped 40%, give or take 10%. While this only brought them back to mid-December levels, one day erased a three-week rally. If the group gets ugly again on Friday, I imagine we’ll see a rally attempt next week.
Volatility is likely to persist through the end of the month. Until Donald Trump officially takes his position in the White House and we get some clarity on tariffs, market players are speculating about what that policy, along with others, will ultimately look like.
Bond yields remain stubborn, and the number of projected rate cuts for 2025 continues to trend lower, so inflation worries are on the rise. This brings me back to gold.
After a sharp correction in November, the SPDR Gold Shares ETF GLD has been trading in a wide range. Currently, it is in the middle of the $240 to $252 trading range, but the technical setup favors a push to resistance rather than a test of support.
On Wednesday, the 10-day exponential moving average (EMA) crossed above the 21-day EMA for the first time in a month. The last crossover provided a tiny pop that ultimately failed, so there’s no guarantee we’ll see a move above resistance, but last time, we did get a move into resistance. The crossover before that happened in July and led to a four-month rally.
Additionally, the long-term Full Stochastics indicator has found a bottom. A few weeks ago, it was in a downtrend, which hinted that the last 10-day/21-day EMA had a tougher path to a strong rally. If GLD closes below $240, I would exit the position. On a rally to $252, I would sell half and set a stop a quarter below the 10-day EMA. Despite the market volatility, this is a risk-reward trade I can tolerate.
At the time of publication, Byrne had no positions in any securities mentioned.
