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SMCI – Chart of the Week for February 15, 2024

by | Feb 15, 2024

This week’s Chart of the Week is SMCI.

Every so often, something so dangerous comes around that I feel the need to warn you about it.

SMCI is one of those things and it’s like a ticking time bomb. Read on…

[By the way, before you dig into this, I’m going live with the story of how I went undefeated in crypto in 2023 scoring an average of 157% return per trade! Click here to join the live room] 

This Week’s Chart

SMCI has out performed to the upside and almost reached the 686% extension of the last Roadmap Line (RML) retrace. In terms of actual numbers, 686% comes in around $1090 area, but let’s call it $1100.

Now, all my data shows that less than 1% of RML bounces ever reach the 686% level.

That means that this move on SMCI is “a little bit out there.”

What historically happens after 686%?

Big retrace.

Now I don’t typically dive into the fundamentals but at these levels SMCI is at a roughly 5x Price/Sales ratio.

SMCI historically — and the larger computer sales sector generally — hangs out at a 0.5 Price/Sales ratio.

In simple math, SMCI is currently 10x higher than its own historical average as well as its peers.

Sales either have to grow crazy big, or the stock price has to come way down — or some combination of those need to happen to bring this into balance again.

Now, the 3rd thing to look at, which is not typically something I do, but I just want to illustrate:

If we run a % move box from the RML up to current-ish levels SMCI is now about 175% (in round numbers) above the RML.

If we look at Cisco Systems (CSCO) ccirca 1999 — during the Dot Com Boom when everything was going to be networked with CSCO routers and CSCO briefly became the most valuable company in the world…

CSCO was about 50% above the RML, then came tumbling back down as other competitors came on the market for routers. (check out the CSCO chart here)

Bottom line: WATCH OUT chasing this!

It is NOT likely to end well.

If you need further proof that this kind of “snap back” not only happens — but is not at all uncommon — take a look at GME, TLRY, DWAC.

The list is long for similar moves.

But today’s not just a warning: I’m playing this to the downside with some $500 strike puts out a few different expirations (months out not weeks) waiting for the drop.

The Chart

You can go check out my chart marked up with notes (entries, targets, etc) right here: https://www.tradingview.com/x/RJCIXCNE/

More Free Trade Ideas

I give out free trade ideas like this all the time on my daily morning show “Morning Monster”, as well as my “30 Minutes of Awesome” show Tuesdays at 5pm Eastern.

To get notified every time I go live with those shows, click here to subscribe to my YouTube channel.

Hope to see you there.

— Jeffry Turnmire

 

PS> *The RoadMap Line or RML is based on my Market Roadmap indicator. Market Roadmap is my custom-built TradingView indicator that helps me spot many of the trades I post, including this one. If you’d like to grab Market Roadmap for yourself — and get access to some of my private Discord channels, too  — just click here to pick it up for $5!

In my Discord channels, I give out EVEN MORE free trade ideas — so think about it: Between the free YouTube content, the Discord channels and the Market Roadmap indicator, you could have more than a handful of trade ideas every week!

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