Last week, I wrote about the “crap stock rally,” noting that many of the market’s biggest winners scored poorly on my Green Zone Power Ratings system.
There was no clearer example than Allbirds (BIRD). The failed shoe company recently rebranded itself as an AI company and watched its stock surge more than 800%.
You don’t need a sophisticated rating system to see the disconnect… and sure enough, most of those post-announcement gains have already evaporated.
Allbirds is still deeply unprofitable, posting net losses of over 50% last quarter, and it’s hard to make a credible case for long-term survival.
But Allbirds isn’t alone… In fact, Goldman Sachs even tracks an entire index of unprofitable companies!
The Goldman Sachs Non-Profitable Tech Index is exactly what it sounds like. It’s a basket of speculative tech stocks currently operating at a loss.
As recently as a few days ago, that index was up over 30% on the year, with virtually all of the gains coming in just the past three weeks.
The crap stock rally lives!
Longtime readers know I’m a trader to my core, and I will never recommend fighting the tape. Momentum is one of the six primary factors that go into my Green Zone Power Ratings system.
But as powerful as momentum can be as a standalone factor, investing based on momentum alone can give you whiplash.
That’s why I pair it with fundamental factors like quality, growth and value. I have much more confidence in a move being sustainable when the business underlying the stock is healthy, growing and (ideally) reasonably priced!
So, with all of that as background, let’s dig into last week’s results.
Tech kept its winning streak alive with the State Street Technology Select Sector ETF (XLK) jumping 3.8%.
But interestingly, energy – which has gotten beaten up badly in April as the war premium has receded – also caught a nice bid. The State Street Energy Select Sector ETF (XLE) broke its losing streak and rose 3.4%.
Health care was last week’s laggard, with the State Street Health Care Select Sector ETF (XLV) losing 3.1%.
So… what’s the story?
Is the tech rally purely due to crap stocks? Or might there be some strong, quality names, too?
Let’s dig in to find out.
Key Insights:
- Investors are clearly looking for risk right now.
- Profitless stocks have been leading the market higher.
- But energy – which rates well on my Green Zone system – is also showing signs of life.
Choose Carefully
I ran my customary screen of the biggest movers in the tech sector that were also still within 10% of their 52-week highs last week. The idea is to look for solid, market-leading stocks that are getting stronger.
Here’s what I came up with:
As was the case last week, this is a hardware-driven rally. Every stock on this list is primarily in the semiconductor business.
There’s nothing necessarily wrong with that. Given that we don’t know who will ultimately win the AI race, taking a “pick and shovel” approach makes all the sense in the world.
But my system is telling us we should be careful here. Of the top six tech stocks that rose the most last week, not a single one rates as “Bullish” on my Green Zone Power Ratings system.
But there are still some real gems here…
Monolithic Power Systems (MPWR) might look familiar. Back in January, I recommended it in my Infinite Momentum Alert. We were in the stock for four weeks and walked away with a quick 29.5% profit.
Infinite Momentum is best compared to a “relay race.” The specific system I use there is designed to find the fastest “runners” for the following four weeks.
So, it’s interesting to see Monolithic now popping up on my Green Zone screen, which is designed for a longer-term, buy-and-hold investor.
This is what I had to say back in January:
Monolithic is in the power management business. It designs, develops, and markets integrated power management circuits for cloud computing, telecommunications infrastructure, automotive, industrial applications, and consumer electronics…
Monolithic had a stable if not particularly interesting business in place. And then the AI boom happened…
The company has experienced massive expansion in its enterprise data, storage, and computing segment, which reached 52% of revenue last year. All of those shiny new AI servers being built for OpenAI, Microsoft and Google datacenters require high-density power delivery. And that’s where Monolithic steps in.
Monolithic started ramping up production in the second half of 2025 for new systems including Nvidia Blackwell GB300s, Alphabet’s Google TPUs using Broadcom IP, and AMD Instinct accelerator systems…
The boom in AI infrastructure is still in the early innings. And the more investment that is made, the more critical power management becomes to keep costs manageable. That means that Monolithic has a long runway in front of it.
Of note, Monolithic rates a perfect 100 on its quality factor… and a “Strong Bullish” 80 on growth.
Steer Clear of Health Care for Now
Health care has really struggled this year. It’s actually the worst-performing sector in 2026, down about 7% year to date.
Could the sector’s bearishness have created trading opportunities for us?
Let’s take a look!
I ran my customary screen of the sector’s biggest losers for the week that are still trading within 10% of their 52-week lows. The idea is to find beaten-down gems that look poised to recover.
Unfortunately, the pickings were slim.
Of the biggest losers last month, not a single one rated as “Bullish.” In fact, all but one rated as “Bearish.”
There may be some opportunities in health care, and I’ll be doing a deeper dive into the sector tomorrow to find some.
But among last week’s biggest losers, my system is recommending caution for now. This isn’t a time to aggressively buy the dip in health care.
To good profits,
Adam O’Dell
Editor, What My System Says Today
