AI Trade Sees Remarkable Rotation as Market Concerns Grow
We have an odd mix of market action on Monday morning. Most notably, a large number of AI stocks are acting poorly, including Alphabet ($GOOGL), Amazon ($AMZN) and Intel ($INTC), while a large group is still flying like ARM Holdings ($ARM), Nebius Group ($NBIS) and Nvidia ($NVDA).
Rotation Inside the AI Trade
The internal rotation within AI is helping to boost the mood while overall market breadth is running around 42% positive. There are around 118 new highs to 63 new lows, which is a fairly sharp drop.
Rotation within AI is a growing theme as the old guard hyperscalers struggle with valuation while infrastructure and some of the commercial applications are seeing strong interest. AI is not a boom-and-bust situation but world-changing technology that will be growing and evolving for quite a while.
Iran Talks Sour and Oil Jumps
Oil is up sharply as negotiations with Iran deteriorate. There is a report that the hard-line IRGC is now in full control of Iran’s diplomatic channel, which does not bode well for a deal. Bonds are lower on this news as well. The risk of military action is growing, and the market is concerned.
Binary Setup in Cullinan Therapeutics
I’m focused on managing positions and looking for opportunities to put some of my idle cash to work.
One name I’m focused on right now is Cullinan Therapeutics ($CGEM). Cullinan is a clinical-stage biopharmaceutical company. Its lead autoimmune candidate, CLN-978, is being developed for lupus and rheumatoid arthritis, while its oncology programs include CLN-049 for acute myeloid leukemia and zipalertinib for non-small cell lung cancer. CGEM has cash and investments of roughly $393 million, which gives it a runway into 2029.
What I find most interesting is that there is a significant binary event coming up next weekend, and I’m looking for positive anticipation to take the stock higher in the short term.
On June 10, CGEM will present new and updated clinical data for CLN-978 in lupus and rheumatoid arthritis. The company will release the underlying data at the EULAR Congress on June 6.
This past Friday, shares pushed toward lateral resistance around $16.50 and are testing a breakout move. It is an attractive technical setup with major news on the horizon. What I find particularly interesting is that analysts are bullish on the stock, with an average target price around $32 according to TipRanks. That is a double from the current price. The lowest target is at $24.
Binary events in the biotechnology sector are risky, but the chart indicates a high level of optimism. I’m not sure how much of a position I will hold into the event, but I’m looking for some positive anticipation in the next few days.
Starting a Position in Revolution Medicines
Another name on my radar is Revolution Medicines ($RVMD). I have been watching for an entry for a while, and I was able to initiate a position for my clients at HammerHead Financial on Monday morning on a dip.
The company received a standing ovation from the audience at a major cancer event this weekend after exhibiting data that positions its drug as the new standard of care for pancreatic cancer. This is a stock I want to accumulate as opportunities arise, and now I have an initial position to track.
Managing Carefully in a Nervous Market
This is a nervous market currently with a lot of news flow on the horizon. I’m focused on managing positions carefully and am unwilling to chase momentum unless there is something exceptional.
At the time of publication, DePorre was long CGEM, RVMD and GOOGL.
