SoundHound stock headed for a massive weekly gain as the shares surged again on Friday. But the strong rally left the AI stock extended even further, about 140% above its buy point, according to IBD MarketSurge.
Shares of the Nvidia-backed voice AI operation soared again after the company announced a deal with Torchy's Tacos — the maker of "damn good tacos" — to use its technology at all 130 of the restaurant's locations.
Santa Clara, Calif.-based SoundHound AI went public in 2022. The company provides AI voice tech to devices, business kiosks and call centers. It's also gaining traction in the restaurant industry, where SoundHound has signed deals with Chipotle, Jersey Mike's, White Castle, Panda Express and Church's Texas Chicken.
Now, Torchy's Tacos is joining the trend. Torchy's describes itself as a "cult-favorite taco chain." It makes items like the "trailer park taco" and the "green chile queso."
"At Torchy's Tacos, we want our guests to have the best experience every time they engage with the brand," Thai Tran said in a written statement. Tran is Torchy's chief technology officer. "Partnering with SoundHound and using their Smart Ordering system, we are able to give guests another way to easily order our food."
SoundHound, which had been a sleepy stock trading below 10, suddenly leaped into the Wall Street spotlight after AI giant Nvidia disclosed that its has taken an investment stake in the company.
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"We think every product is going to benefit from voice AI," SoundHound Chief Executive Keyvan Mohajer told Investor's Business Daily in a recent interview. "And then every service also is going to benefit from an AI agent. Those are the two pillars of our business."
SoundHound's shares are about 136% above of their 50-day moving average and roughly 182% north of their 200-day line, MarketSurge chart analysis shows. With the stock so extended in such a short period of time, it would be prudent for investors to take partial profits at the current level.
Investors generally want to start looking into taking profit when a stock becomes extended 70% to 100% above its 200-day line.
Traders can also use a downside reversal off highs as another level to trim, followed by an undercut of the prior day's lows. Shareholders can then use the 10-day and 21-day moving averages as other areas to lock in gains.
But buying a stock that's wildly extended is very risky. Savvy investors should wait for the stock to settle down and form a new buyable area. With the stock more than 100% above a buy point in just five weeks, investors should keep an eye out for a high-tight flag. That's a rare, bullish pattern that leading stocks tend to develop in strong markets.
SoundHound stock has a perfect IBD Digital Relative Strength Rating of 99. This means shares rank in the leading 1% of all stocks when it comes to 12-month performance. SoundHound shares beat out their previous record-high closing price on Friday, ending the regular session at 15.01.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
