The Artificial Intelligence industry has been on fire lately, but that momentum has slowed down a consider amount since ChatGPT really made headlines a few months back. However, there was one AI stock in particular that rode this wave quite nicely, only to eventually come crashing back down on the rocks.
C3.ai (AI) is an artificial intelligence company that burst over $24 between January and April. After starting off the year at around $10 per share, within a couple of months, the stock would be trading north of $34.
If you caught this parabolic rise in price then this was an excellent trade, however, as I ask my students often, what stock goes up like this and doesn’t eventually come back down? Now, as the stock falls back to support at around $20.25, we have a decision to make. Is the risk vs. reward back to the upside or downside? If this support level is broken, we could see the stock fall as far as $18, but, this is still a support level… until it’s not.
In a trade like this, gauging price action at this level will be the key to answering the above question. If price doesn’t respect this level and breaks through with no retest to the upside, then we know the move down is valid. Alternatively, if the price bounce right on this level, we could be open to calls. Do not try to predict, but rather, react to what the market is giving you.
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