Artificial intelligence is the next frontier, and investors want to get in on the ground floor. No wonder I get more emails asking how to best invest in artificial intelligence than any other subject.

At The Arora Report, we use different strategies to attain maximum risk-adjusted returns. One is the “picks and shovels” strategy that has often been profitable. Prudent investors aiming to generate returns in excess of those commensurate with the risk taken may want to take a hard look at the picks and shovels strategy when looking at artificial intelligence. Let’s explore, starting with a chart.

The chart

Please click here to see an annotated chart of Applied Materials AMAT.  It’s a monthly chart to give a long-term perspective. The Arora Report bought this stock at $16. As of this writing it is showing a gain of 251%. Please note the following from the chart:

• Applied Materials had been smoothly moving up along the trend line shown on the chart. Over the past two months, the price is significantly moving away from the trend line. This is often an early sign of a stock ready to go parabolic after a pullback.

• The chart shows RSI (relative strength index) divergence. In plain English, it means that as the price is going up, momentum is falling. This is often an early sign of a pullback.

• Applied Materials’ history shows that there is a fairly high probability of a pullback to just above the trend line shown on the chart.

• The chart shows that volume has been restrained. In traditional technical analysis, this is bearish…Read more at MarketWatch


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