A major shift is happening in a popular U.S. technology stock.
Let us explore with the help of a chart.
ChartPlease click here for the chart showing segmented money flows, risk-adjusted rankings and non-risk-adjusted rankings of 11 popular tech stocks. Please note the following from the chart:
• For a long time Amazon AMZN, +0.61% has been the king, always getting a non-risk-adjusted ranking of number one. Now the king has been overthrown. The new king is AMD AMD, +4.13% AMD’s stock has surged about 120% this year. Amazon’s shares are up by about half that amount.
The rankings shown on the chart are based on the six screens of ZYX Change Method. The premise behind the ZYX Change Method is that most money is made with the lowest risk by successfully predicting changes before the crowd notices.
• The common element among all stocks is that money is fungible. An investor deciding to invest new money in stocks today can freely pick AMD, Amazon or any other stock. An investor looking at the non-risk-adjusted ranking would pick AMD over Amazon.
• Non-risk-adjusted rankings are useful for the short term. Risk-adjusted rankings are useful for the long term.
• In the big picture, AMD, Nvidia NVDA, +0.99% and Intel INTC, +1.28% are in the same business. It was not that long ago that Nvidia’s stock was trading in the $20 range. Now it is trading around $250. And now AMD’s stock is trading in the $20 range; can it become a so-called 10-bagger? Once upon a time Intel also provided huge gains, but many investors probably don’t remember because it was such a long time ago.
• AMD is undergoing a short squeeze. A total of 23.04% of the float is short. Under the short squeeze column in the chart, AMD has been rated extremely positive. Now that call is coming true. Many investors have believed that the rise in AMD stock was not justified. For this reason they sold AMD stock short, betting on a decline. In a short squeeze, short-sellers panic and buy to cover shares they previously sold short. Right now, short-sellers in AMD are in a panic, pushing the stock higher.
• Momo (momentum) crowd money flows are extremely positive in AMD. They are also extremely positive in Apple and Amazon.
• Smart money flows are only mildly positive in AMD. This is a note of caution.
• The chart shows that the short squeeze potential for Tesla TSLA, +0.47% is very positive.
• The short squeeze potential for Apple AAPL, +0.24% Google GOOG, +0.92% GOOGL, +0.78% and Microsoft MSFT, +0.66% is negative.
• The chart shows that the short squeeze potential for Facebook FB, +0.88% Amazon, Netflix NFLX, +3.15% Alibaba BABA, +1.38% Intel and Nvidia is positive. Often a short squeeze is the trigger for the initial rise in a stock, and then the momo crowd takes over.
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FundamentalsIn the long term, fundamentals drive stocks. If you could consider only one fundamental factor, it is earnings growth. The problem with traditional fundamental analysis is that everybody has more or less the same information. For this reason, traditional fundamental ratios such as price-to-earnings (P/E) do not provide an edge. For investors who are looking for an edge, the data shown on the chart provides just that.
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.
