SMCI stock is taking investors on a wild ride. The stock breezed past gains of more than 250% in 2024, following a 22-week consolidation period that began in August last year and ended in the beginning of 2024.
But while SMCI stock has provided significant upside for investors, Mike Webster, senior market strategist at IBD, tells Investor's Business Daily's "Investing with IBD" podcast, also says the stock may not be for every type of investor.
"When you're looking at a stock, it's not just about what that stock is doing, it's about what your overall account is doing, what the general market is doing, and your having to be fluid with it," said Webster. He recalls IBD founder William O'Neil reviewing his portfolio, selling off other stocks to keep a position in a stock O'Neil was convinced was a winner.
Audio Version Of Podcast Episode
Since the beginning of the year, SMCI shares have pinballed, reaching a high of 1229 and a low of 855 — both in March. The climax action in SMCI stock encourages offensive selling, but investors convinced SMCI stock is a winner should instead try to retain their core holdings of the stock and adjust their portfolios, said Webster.
What's Driving SMCI Stock
The server specialist is ranked 1st in Computer Hardware and Peripherals group, with a Composite Rating of 99, according to IBD Research. This makes it an attractive stock for investors looking for exposure to the semiconductors and tech hardware industry.
SMCI stock has rallied on the back of the generative AI boom. Investors anticipate strong demand for its AI-centric server technology, in lockstep with the growth of AI-centric chipmakers like Nvidia. SMCI joined the S&P 500 this year.
SMCI stock has seen wild swings of up to 8% in March, coupled with heavy volume that points to continued institutional interest. "This is very volatile and something most people shouldn't be trading," Webster said. "But we're using it to illustrate the point that if you get into something and you have something special on your hands, that's when you study this indicator, make sure I understand it, and then hold my core position until these things trigger."
Using Moving Averages To See The Bigger Market Picture
One wider market indicator worth paying attention to is the 21-day moving average of major indexes, says Webster. For major averages, "the 21-day is the very simplest form of trend following," Webster said. "If it's trending above a 21-day, it's gas-on. If you're underneath it, your brakes are on and you're being more defensive."
Tracking the moving average may also help investors stay calm in a stormy market. "The market is run by just a bunch of algos and a bunch of portfolio managers, and they're trying to beat or at least stay up with what the S&P is doing," said Webster.
Watch this week's podcast featuring Mike Webster to learn when and how to hold winning stocks.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
