Experienced traders noticed a drastic change this week.
You might’ve noticed it too…
I’m here to confirm your suspicions and share my trade plan.
There’s a catalyst coming. And the entire market is on edge.
This directly relates to the AI trade. The future of technology hangs in the balance. And tech stocks are already reacting.
Headlines mention “the beginning of the end”.
Every day a new catalyst inspires fear in the sector.
What’s happening? And what do we do?
I have the answers.
The Market Hates Uncertainty
You’ve probably noticed… There are fewer trade opportunities this week.
I sent this message to traders on Tuesday:
It’s not your imagination. And our strategies aren’t failing us.
It’s the midterm election on November 3.
AI has become a massive campaign issue. In mid-September, a national poll found that 61% of voters opposed building AI data centers, versus 34% who supported them.
Political candidates are paying attention. And surprisingly, it’s not neatly split along party lines. Lawmakers who used to support data centers made some notable pivots.
That means the next Congress, and the states where these data centers get built, could soon look very different for tech.
Some outcomes would bring more regulation and data center restrictions. Others would allow the buildout to keep running at full speed.
Nobody knows which way the election will go. And that’s the problem.
Markets hate uncertainty.
To put your mind at ease for a moment, let’s zoom out.
Pull up a five-year chart of the tech-heavy QQQ. The last few days of weakness barely register. The chart still shows a move from lower left to upper right.
Stocks like Nvidia, Micron, and SanDisk have logged massive runs over the past couple of years. Even after this recent pullback, a lot of these names are still much higher than where they started.
That explains the recent weakness. Put yourself in the shoes of a hedge fund manager who’s sitting on massive gains…
Why risk it?
Wall Street fat cats are taking profits off the table and waiting for the election to play out. If the results go their way, they can just buy back and ride the trend.
In the meantime, all that caution drains momentum from the market. It means fewer runners, fewer clean setups, and choppier price action.
My Trade Plan
I’m interested in AI stocks on overextended selloffs.
I love to play reversion setups…
When a stock spikes too far or falls too fast, it’s bound to switch directions momentarily.
And right now there are a bunch of AI stocks falling at an unsustainable rate.
My top watch right now is IREN Limited (NASDAQ: IREN). It’s a vertically integrated AI cloud services platform that develops, owns, and operates data centers. That includes the associated land, grid connections, and substations, as well as buildings and cooling systems.
It’s on a massive downtrend lately. Trading way off the 50, 100, and 200 simple moving averages (SMA).
Plus, the relative strength index (RSI) is close to 20.
The RSI shows us when a stock could be overbought or oversold. Above 70 means overbought. Below 30 means oversold.
This is the alert I sent traders on Tuesday, October 20:
“BUY IREN 10/30/26 27 CALLS”
“IREN keeps testing lows and RSI is now near 20! A violent snap back is in order; could see 30 before the week is over, but I like the idea of having an extra week.”
The AI and tech sectors are experiencing weakness. But we can use that weakness to our advantage.
I expect bullish momentum to return before the year ends. Until then, stay on the lookout for overextended bounce setups.
Stay Street Smart,
Jeff Zananiri
