AppLovin Sees Momentum Shift After SEC Probe Report
The market has sustained strong market momentum but that can go both ways for some names.
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Strong market momentum continued on Monday, but the action was mixed with breadth running close to flat. There continue to be some significant moves in speculative small stocks that are leveraged, mainly in relation to AI, but there are signs of exhaustion in certain stocks that have made substantial gains. A good example is the data center names Nebius Group (NBIS) and CoreWeave (CRWV) , which initially surged higher early in the day but reversed lower in the afternoon and closed at their lows.
Advanced Micro Devices (AMD) , which drove much of the frenzied action after a deal with OpenAI, was off $22 from its intraday highs at the close, however, it was still up 24% and helped to drive a 2% gain in the Semiconductor sector (SMH) which also closed at its lows.
The market action presents a dilemma for market players who are enjoying sizable gains by staying with stocks that are highly extended. It has been costly to sell early, but the bears' warnings about bubble action and the likelihood of some sudden corrective action are hard to ignore.
A good example of how fast a stock can correct is AppLovin (APP) , which is down 14% following a Bloomberg story about a possible SEC probe into data collection practices. APP has been a momentum favorite, but momentum can work in both directions.
While the action may feel very frothy in places, there is still no real technical damage. If you're riding momentum, there is an excellent likelihood that you are going to give back some gains when things turn. It doesn't hurt to take some partial profits into strength, but positive momentum always lasts longer than seems reasonable.
My best advice is to stay extra vigilant, tighten stops, and be ready to reduce some positions if the momentum cools. The goal is to keep accounts as close to highs as possible but to give winners some room for normal volatility.
Have a good evening. I'll see you tomorrow.
At the time of publication, TheStreet Pro Portfolio was long NBIS and CRWV.
