Is it Time to Buy the CoreWeave Dip?
After an unloved IPO, CoreWeave shares have done something for the first time.
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The S&P 500 and the Nasdaq are back around all-time highs. The Russell 2000? Who cares about that, right?
For what it’s worth, the Russell 2000 has the same breakout pattern as the Nasdaq and the S&P 500, so if the big names rally, there’s a great chance the Russell 2000 adds a quick 5%.
Another hated rally.
I can’t recall, in recent memory, a rally to new highs that wasn’t hate. We’ve moved past the wall of worry into rallies of disdain and disbelief, and, you know what, I’m OK with that. Emotion drives the market. It makes for great trading. Love. Hate. I embrace them both. They create opportunity.
Speaking of hated, CoreWeave CRWV was an unloved IPO, almost failing to reach the public markets. After a month of struggling to find buyers, the trend reversed in May. Shares more than quadrupled in six weeks. Shares have been riding the 10-day exponential moving average since the beginning of May. On Wednesday, we saw a close under the 10-day EMA for the first time during this massive rally.
The recent three-day retracement isn’t the first time it happened during the rally, but the intraday bars have been wider, and this is the first time CoreWeave closed below its 10-day EMA.
This isn’t a dip I’m willing to buy. The current price action is more of a coin flip here. On the downside, I expect support to appear at the 21-day exponential moving average. That level corresponds with the lower levels of the first half of June.
CoreWeave isn’t the only recent move that broke down yesterday. Digital Realty Trust DLR closed below both its 10-day EMA and 21-day EMA. This isn’t the first time during its nearly three-month rally that DLR fell below its 10-day EMA, but it is the first time since early April that it closed below its 21-day EMA.
DLR appears to be at a higher risk than CRWV, in my opinion. I’m keeping a close eye on the full stochastics indicator. The last time DLR suffered a bearish crossover, the black line crossed below the red line while it was in overbought territory, and it trended lower for the next five months.
We haven’t confirmed a bearish crossover yet, but the price action is concerning. The $175 to $178 range is developing as strong resistance. It’s easy enough to wait for a close over the recent high before considering a long side position, because the downside could be significant here.
At the time of publication, Byrne had no positions in any securities mentioned.
