The earnings season for U.S. stocks in Q1 is approaching its end, and this time the AI Sector has performed moderately, with many AI-related Stocks experiencing sharp declines after earnings reports were released, such as lithography machine giant ASML Holding, chip foundry Taiwan Semiconductor, and one of the AI leaders Super Micro Computer.

Some investors believe this may indicate that the AI Sector has peaked. However, there are also some investors who remain bullish on the AI Sector, thinking that this downturn may just be a temporary correction.

If you belong to the latter group, believing that there are still potential opportunities in the AI Sector, what should be done?

This article introduces a simple trade strategy for corrections, including stock selection methods, how to identify potential buying and selling points, and how to manage risks.

How to select Stocks using the 'GAINIANBANKUAI' concept?

To invest in AI, the first step is to find the Sectors that benefit from AI.

The Sectors that benefit from AI can be divided into upstream infrastructure construction and mid- and downstream hardware and software. Among them, the infrastructure includes AI chips, memory chips, and cloud computing facilities, etc.

How to find related Concept Stocks?

Investors can find potential AI concept stocks through the "Concept Sector" feature of Futubull. The specific path is: Market > US Stocks > Concept Sector.

In the Concept Sector, there are many investment thematic concept sectors, among which there are four related to AI: AI Chips, Semiconductor Selection, Chatgpt Concept, and Cloud Computing Service Providers.

Taking the Semiconductor Selection concept as an example, clicking in will show the related concept stocks, and investors can sort them by Market Cap to find the relevant leading companies.

In the Semiconductor Selection concept, the top five leading companies by Market Cap are NVIDIA (NVDA), Taiwan Semiconductor (TSM), Broadcom (AVGO), ASML Holding (ASML), and Advanced Micro Devices (AMD).

How to seize the opportunity to buy during a pullback?

After selecting the related stocks, finding potential buying points is very important.

Typically, stock prices do not blindly rise or fall. Often, the market needs to make some adjustments before continuing the previous trend after gathering strength.

However, how much the stock price will adjust is a concern for most investors.

In technical analysis, there is a tool that can help determine potential adjustment levels, known as the Fibonacci retracement line.

The Fibonacci retracement line is also called the Golden Ratio line. As the name implies, it is designed based on the principles of the golden ratio sequence, containing a series of percentage retracement points (such as 23.6%, 38.2%, and 61.8%), helping investors identify potential resistance and support levels during the retracement process.

How should the Fibonacci retracement line be drawn? On Futubull, it can be found in the drawing tools as 'Fibonacci Retracement Line'.

Taking NVIDIA as an example, first identify the lowest and highest points of the company's most recent upward trend, then connect the closing price high and low points of the upward trend.

From the daily candlestick chart, NVIDIA's current upward trend can be traced back to a low of $392 on October 31, 2023, with the peak reaching $974 on March 8, 2024.

Generally, the two most important retracement points of the Fibonacci retracement line are 38.2% and 61.8%. Therefore, investors can focus on these two potential buying points. In the case of NVIDIA, the stock prices corresponding to these two points are $752 and $615.

However, it is worth noting that many experienced traders believe that once the 61.8% retracement level is effectively broken, it signifies the end of the previous major trend, and the market is no longer defined as a retracement, but as a reversal.

How to manage risks?

No one can predict stock prices with 100% accuracy. If the potential buying point is judged incorrectly, investors may suffer severe losses, so risk management is crucial.

Setting a stop-loss is one of the effective methods for managing risk. A stop-loss refers to setting a price as a stop-loss point, and when the price drops to that point, it is sold, with the goal of stemming losses and preventing further deterioration.

There are many methods for stop-loss, here is a relatively simple and easy-to-use strategy——7%-8% stop-loss strategy. As the name suggests, based on the purchase price, if the stock price continues to fall by 7%-8%, investors should decisively cut losses.

Returning to the earlier example of NVIDIA, if an investor intends to buy NVIDIA at the 61.8% retracement level, the corresponding stock price is around $614.5. Therefore, the stop-loss point can be set between $565 and $571.

Investors can set take-profit and stop-loss orders through the advanced order function of Futubull.

In conclusion.

This article introduces how to use the GAINIANBANKUAI feature for stock selection and how to use technical analysis to identify potential buying and selling points. However, one must be aware of the following risks in stock selection and technical analysis:

1. Ignoring fundamental factors of the company may lead to potential risks.

2. Over-relying on a single Indicator may lead to misjudgment of market trends.

Investors should consider market dynamics, company fundamentals, and Technical Indicators comprehensively for investment decisions, which helps reduce risks and increase the success rate of investments.

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