Summary
Highlights
Despite a scary market flash of red at the start of Q4, the AI rally is not over. The soaring prices of rare earth stocks, essential for AI technology, indicate that the AI rally is in full force. Any company involved with AI is expected to see significant growth.
The market is undergoing an expected 4-6% correction, with last Friday accounting for nearly 4%. The speaker emphasizes that markets don't perpetually climb and require stress tests. The all-time high in gold suggests a significant amount of money is still on the sidelines, waiting to enter the market, indicating the 2025 bull run is not over.
Donald Trump's reignition of tariff wars with China over rare earth minerals, with threats of an additional 100% tariff, could fuel inflation. This makes it challenging for the Federal Reserve to cut interest rates, creating tension in the market and potentially weighing down stock prices.
Traders should follow market charts and let the market determine its path before taking risk positions. The recent bearish engulfing candle on the SPY, consuming three previous weeks, indicates a significant pullback. The speaker analyzes past market behaviors with similar patterns, suggesting specific price points to watch for potential recovery or further decline.
Upcoming Q3 earnings, especially from big tech companies, will reveal the strength of the AI rally. The speaker highlights BBAI as a small-cap AI stock with significant upside potential, calling it a 'rocket ship.' He advises discipline, patience, and the use of stop-losses when trading such volatile stocks.
The speaker expects BBAI to reach $20, with key resistance levels at $10 and $13-$14. He notes BBAI's outlier behavior during market sell-offs, continuing to climb when others fall, indicating strong short-squeeze potential. This resilience makes it a compelling investment, but careful risk management with stop-losses is crucial.
In volatile markets, traders need to become 'snipers,' carefully managing position sizes and avoiding holding positions overnight as swing traders. The use of stop-losses is critical to prevent significant losses, as demonstrated by recent trades in the Stocks with Josh Pro Trading community.