MarketSurge powers the charts in this video.
Last week, we discussed how extended semiconductor stocks are from their 50-day moving average and how likely it is for them to pull back. They tried to pull back earlier in the week. SMH and QQQ didn’t even test their rising 10-day simple moving average, and they shot back to new all-time highs. The V-shaped recovery has left many underinvested, and now they are eager to buy every small dip. This is what creates the so-called lock-out rally – if you are patiently waiting for a good entry, you might miss the first 30-50% of a move.
If you are a retail trader, it’s always better to be on the sidelines wising you were in, than to be in, wishing you were on the sidelines. The situation is entirely different if you are managing other people’s money. If you are missing a rally is the biggest professional mistake you can make. This is why the dips are so tepid, and the buying is impatient. The strong earnings reports are making the FOMO even stronger. Semis continue to crush estimates. SNDK is expected to earn $160 per share in 2027. They made $3 in 2025. Megacaps AAPL, AMZN, GOOGL also beat estimates and the market reacted favorably. Even select software stocks are gapping up to new 52-week highs on better than expected earnings – we hadn’t seen that in a long time. SBUX and COCO broke out last week, too. So it is not just AI-related stocks getting all the inflows. The market rally is expanding into other areas.
Don’t get me wrong. I am not suggesting we drop all proper risk management guidelines and start chasing. There will be dips. Even in the strongest tapes, there are dips. Even if they are to a rising 10 or 20EMA, it’s better to enter on a pullback with a tight stop, then to mindlessly chase extended stocks. We saw it last week. AAOI, AXTI, AEHR dropped 20-30% in a few days. They found support near their rising 20EMAs and bounced back 30-40% in a few days.
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