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Crouch & Spring: A Simple Theory of Share Price Movements

January 9, 2024
Microsoft (MSFT) 3-month candlestick chart
Microsoft (MSFT) 3-month candlestick chart

Microsoft is looking like a classic example of my crouch and spring theory of investing. Another way of thinking of this is that it is unreasonable to expect shares to go up in a straight line. It is an endless process of three steps forward and one or two steps back, but if they keep doing this long enough, they can make serious, not to say astounding, progress.

Microsoft has just had a serious reverse, a deep crouch, you might say, with the shares reaching around $350 in the summer of 2021 before falling back to a low of some $212. Since then, they have reached a new all-time peak of $384 and are currently at $367.

In technical terms, they have formed what I call a bull hook pattern. This is a bullish pattern. What does that mean exactly? Who knows, but most likely, higher share prices ahead.

This crouch and spring pattern is occurring all over the place, certainly with the exciting technology shares I follow.

Meta Platforms (META) 6-month candlestick chart
Meta Platforms (META) 6-month candlestick chart

Meta’s Deep Crouch Suggests a Mighty Spring Ahead

One exciting possibility is that there is a relationship between the depth of the pattern and the extent of the subsequent advance. This pattern is very deep, especially in percentage terms. The shares fell by 75 per cent, so maybe they could now quadruple from here as in $1400, here we come.

It always sounds incredible when you pitch targets so far above where the shares are trading currently but history suggests this and much more can happen. In 2012, the shares fell as low as $17.50, and now they are $355.50.

Meta Platforms is an innovation machine.

There continues to be a ton of innovation in AI, and we used Connect to describe and start launching a lot of the new consumer AI experiences that we expect to become meaningful parts of all of our apps and our business over the coming years.

We started rolling out Meta AI, our new assistant that you can access across all our messaging experiences and smart glasses to answer questions, get access to real-time information, and generate photorealistic images. We started launching our AI Studio platform that enables people to create and interact with lots of different AIs for help getting things done and just having fun. We rolled out Emu, our image creation model, that produces high quality images and stickers fast. We launched an early alpha of business AIs so that eventually every business can have an AI to interface with customers to do sales and support. We laid out the plan to launch creator AIs next year so every creator can have an AI their fans can engage with to help them build out their community. And that’s just a snapshot of some of the AI work that we’re doing.

Marc Zuckerberg, Meta Platforms, Q3 2023, 25 October 2023

Meta Platforms is launching all this innovation into an audience of ‘more than 3.9bn
people who use at least one of our apps every month’. It seems to me that Meta Platforms ultimate market value has got multiple trillions written all over it.

I think the shares are a buy right now, but above $400, it will be fill-your-boots time.

Not surprisingly, Zuckerberg says.

And I think that it’s going to be a very exciting 2024.

Mark Zuckerberg, Meta Platforms, Q3 2023, 25 October 2023

So do I.

There is also the possibility that the Metaverse is going to become a reality one day.

We just launched Quest 3, our most powerful headset yet, at a very competitive price. We packed a lot of improvements in there, including a next generation chipset with 2x graphics performance, our best displays yet, and a form factor that’s 40pc thinner than Quest 2. But the most important breakthrough for Quest 3 is that it’s the first mainstream mixed reality device. That means that when you put on the device you see your physical room around you, and you can bring digital objects and games into your physical space — whether that’s a ping-pong table, your workstation, a big screen TV to play Xbox games on, or your friends as holograms. The early reviews have been great and it’s been fun to see how people respond to this.

We also launched the next generation of Ray-Ban Meta smart glasses. They are upgraded from the first generation in basically every way — better camera, clearer audio, they’re lighter, they have more styles, and you can now even livestream video from them. But most importantly, these are the first smart
glasses shipping with Meta AI built in, so you can ask your glasses questions throughout the day and it’ll answer them right in your ear. In many ways, glasses are the ideal form factor for an AI device because they enable your AI assistant to see what you see and hear what you hear. Again, it’s good to see the early reviews are so positive, and I’m looking forward to this space evolving quickly over the coming
years.

Marc Zuckerberg, Meta Platforms, Q3 2023, 25 October 2023

I don’t think there is anything in the Meta Platforms share price for the Metaverse presently but it could become huge and is right out of science fiction. The mind boggles at the potential – maybe decades from now we could each have avatars exploring the solar system.

The first time I took marihuana, I was bumping along through Turkey on an old bus, and I literally felt I was flying. It was the greatest high I had ever experienced. I have since wondered if there was something else in the mix because the effect was so incredible. A guy got scared at a rumour that Turkish police were going to stop and check the bus. He was going to throw the stuff away; with all the naive optimism of extreme youth, I followed him, told him to give it to me, and launched myself into paradise. The police never came.

If the Metaverse is going to offer experiences anything like that – WOW!

NVIDIA (NVDA) 6-month candlestick chart
NVIDIA (NVDA) 6-month candlestick chart

The NVIDIA chart is looking super strong. Q4 2024 results for the 12 months ending 31 January 2024 are due on 21 February. If those results are going to be amazing we would expect the shares to be moving up in anticipation and they are.

I have just read a detailed analysis of NVIDIA on Seeking Alpha, where clever guys write blogs about stocks they like or don’t like. This guy concluded:-

NVIDIA Set For Several Years of Phenomenal Growth

I strongly believe that NVIDIA has several years of phenomenal growth ahead of it because its GPUs are very important to its customers if they want to stay relevant. And if these chips were not so incredibly important, there would be no trade restrictions. That is why I believe that NVIDIA and AMD will be larger and more important companies in five years than they are today. Both have a vision and a strong position to capture the trends of the future, although NVIDIA is probably better positioned at the moment. And I fully expect them to have some surprises for us that they are developing in their labs right now.

Of course, NVIDIA may see a bit of a slowdown this year after its meteoric rise, but the company is very well positioned for the long term, and the stock should follow the company’s continued success.

Seeking Alpha, Tangerine Capital
8 January 2024
iShares Semiconductor ETF (SOXX) 6-month candlestick chart
iShares Semiconductor ETF (SOXX) 6-month candlestick chart

Semiconductor Shares on Fire Boost SOXX

SOXX is an ETF specialising in semiconductor shares. As can be seen below, it has an exciting portfolio. I was surprised to see that NVIDIA is not the largest holding, but the way things are going, it soon may be.

Top 10 holdings from iShares Semiconductor ETF (SOXX)
Top 10 holdings from iShares Semiconductor ETF (SOXX)

As always, one of my go-to stocks if you are wondering what to do is QQQ3. The chart looks great, the leverage is spectacular, and it is all about technology, so it’s just where you want to be.

WisdomTree NASDAQ 100 3x Daily Leveraged ETF (QQQ3) 6-month candlestick chart
WisdomTree NASDAQ 100 3x Daily Leveraged ETF (QQQ3) 6-month candlestick chart

Strategy: Buy Where the Action Is!

You make thing my copy is sometimes a tad repetitive, my daughter certainly does but why reinvent the wheel. The best shares to buy are the ones you like the most. I believe NVIDIA is a phenomenal company, maybe one of the greatest and most game-changing of all time. They don’t come along every day.

It is hardly undiscovered, but there is still a huge debate about its prospects and its values. The shares are climbing a wall of worry just as Microsoft shares did in their initial glory days under Bill Gates. Human beings are natural doubters. It is only when everybody is certain it is all plain sailing ahead that we need to beware. I believe the NVIDIA story is still unfolding and is going to be incredible, justifying the spectacular share price performance that the chart is telling us to expect.

Its chief rival, Advanced Micro Devices, also has an amazing chart.

Advanced Micro Devices (AMD) 6-month candlestick chart
Advanced Micro Devices (AMD) 6-month candlestick chart

Look at that chart. Talk about simmering. It could turn around and collapse. GenAI could turn out to be a mirage. Bill Gates, Jensen Huang, Mark Zuckerberg and Satya Nadella (CEO of Microsoft) could all be wrong, but also they could be right, and if they are, there could be fireworks ahead.

So many investors distrust the obvious, not me. Many of these tech shares look poised to explode, carried higher on the greatest wave of innovation the world has ever seen. Just put your money where the action is and watch the gains roll in.

Share Recommendations

  • Microsoft (MSFT): Buy @ $370.80
  • Meta Platforms (META): Buy @ $353.50
  • NVIDIA (NVDA): Buy @ $512.50
  • iShares Semiconductor ETF (SOXX): Buy @ $555.50
  • Wisdomtree Nasdaq 3X Daily Leveraged (QQQ3): Buy @ $144
  • Advanced Micro Devices (AMD): Buy @ $145

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