My job is to analyze financial markets, let be me clearer actually, look for the highest probability that an equity, indice, cryptocurrency or commodity, might show its technical hand and allow me to explain to our readers where that market may look to go next.
If I see one is showing no hand, it’s quite simple, I stay away. Some might say, well look at the fundamentals then, for those who have read my recent article (As Nervy Markets Procrastinate, The Path To S&P 6500 has Been Set) will know, I don’t use fundamental analysis, and it is through the evidence humans leave on a financial chart by printing waves of buying and selling, that I read what may happen in the future that has led to the successful calls I’ve had to date.
The C3ai (NYSE:AI) chart is one of those I’d normally stick away from, but there has been some slight seeds of evidence, at least, what direction this equity may be looking to go in what has been a protracted technical mess. If you have invested in this stock upon technical analysis I’d like to know your strategy please, if you have invested on fundamentals I’m not sure how you would be doing, depending on where you invested of course, as C3ai seems to be eternally stuck in a relatively tight technical range and investors will be hoping that upcoming earnings will clear this whole thing up and give this stock finally some proper upper momentum.
The company, founded by billionaire Thomas Siebel in 2009, develops software solutions via enterprise AI applications expects an EPS of -0.30 with revenue expected at $84.40m.
The last twelve months have been an EPS beat albeit in minus, with revenue beating three out of the last four quarters, but only by 3% or under on those occasions. This is also the first time Revenue is expected in the 80 million region, up from the 70s in that period, with analysts expecting an uptake in revenue at least.
Now we can move over to the charts to demonstrate what I mean by a “Normal” chart that shows its technical hand against one that hasn’t. I will start by taking a quick look at the SPY, including the pandemic breakdown, you can see what this market is trying to achieve by creating wave patterns that include bullish buying vs. rejection bearish selling leading to clear bullish overall demand as this market climbs higher through those patterns on a trajectory upwards.
Now if we look at the C3ai chart and this is obviously just an example from roughly the same period, the bearish traction off $180 aside, we can see no clear evidence of bull or bear control since the nearer term $10 region bottom and $50 region top.
Now I will outline different scenarios for both, as there has been some bullish traction on the weekly chart of late.
Bullish Case
Looking at the weekly chart, C3ai is already in a wave to $30 by the bounce off $20 seeing a rejection at $25 where the third wave should look to copy its wave one $20-$25 and arrive at $30.
This possibly depending on earnings may land but is hardly a large wave, we will look at the monthly to see can we gauge and further bullish traction.
It will have to be news the market likes this week that can push this equity higher on the monthly, and ideally it’s going to need that weekly pattern to complete within this structure and then take out the $38 region as can be seen in the chart if this stock is going to show serious intent. Whatever happens in an upward case, it will be at the very least the end of June that C3ai can print a three wave pattern assuming this month finishes in bullish formation and the all important rejection candle were to come quickly, but that is not to say the rejection won’t come in the coming months either finally giving C3ai a bullish target in the future to work off.
Bearish Case
As you can see, there is a pattern that can take C3ai to $12 should this month’s candle finish in bullish formation and be broken below as illustrated in the picture. As we speak, the market is set up for that, but earnings could change the picture dramatically. The weekly chart is showing no immediate bearish case, only the bullish one outlined above.
To summarize, C3 is setting up for a move upwards, certainly in the weekly chart anyway, this equity will have to make a three wave pattern on the monthly chart regardless if there is to be serious traction upwards, and I am issuing a hold signal until this maze of a chart becomes technically clearer in what C3ai will look to do in the future.
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