Hard drive maker Western Digital (WDC) has been on a tear all year.
It rose 41% last week… and is up 339% year to date.
As recently as last year, most analysts would have agreed this “old technology” stock’s best days were back in the 1990s.
And yet today, amid the AI infrastructure boom, the stock is going parabolic.
Make no mistake, 41% in a week is a massive move, even for a go-go tech stock.
But that’s the market we’re in.
Demand from AI data centers is fueling a monster rally in not only Western Digital, but the rest of the tech hardware sector as well.
The State Street Technology Select Sector ETF (XLK) was the strongest-performing sector last week, up 4.5%, helping pull the S&P 500 Index up a solid 1.5% even during a holiday-shortened week.
Former Fed Chairman Alan Greenspan, who passed away this morning at age 100, famously coined the phrase “irrational exuberance” back during the 1990s tech bubble.
Are we seeing more irrational exuberance today?
Let’s see what my system says…
Energy lagged for the second consecutive week, as the State Street Energy Select Sector ETF (XLE) was down 5.9%.
With the war in Iran over (at least for the time being!), the war premium that was built into prices is slowly draining away.
So, should we bail on energy… or use the recent weakness as a buying opportunity? We’ll see what my system has to say about that shortly.
Key Insights:
- Tech stocks, led by hardware, continue to explode higher.
- Energy continues its post-war drift.
- We may be seeing “irrational exuberance.”
Hardware Leads the Way
I ran my customary screen of the biggest movers in the sector that were 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:
I mentioned that Western Digital was up 41% last week. But its primary competitor, Seagate Technology Holdings (STX), didn’t have a bad week either. Seagate was up a very impressive 23%.
My Infinite Momentum subscribers enjoyed the move in Western Digital. I recommended it in my Tech Titans portfolio back in February, and the shares are already up 178%.
And Western Digital isn’t the only Infinite Momentum stock on today’s list…
I recommended Applied Materials (AMAT) back in September and Micron Technology (MU) about a year ago. They are now up 229% and 835%, respectively.
After moves like these, it’s natural to wonder whether it still makes sense to continue holding.
As humans, we are emotional animals, and the mental tug-of-war between the fear of losing those gains and the greed of wanting to continue riding them higher is very real and utterly exhausting.
I would go so far as to say it can be paralyzing.
And that’s exactly why I trade Infinite Momentum using an objective, data-driven system. I don’t have to make the agonizing choice. My system builds the Tech Titans portfolio by ranking every stock in the Nasdaq 100 Index based on my proprietary criteria.
Based on my research, the top 10 stocks are the statistically most likely to continue leading the pack over the following four weeks. And once we hit the end of that four-week trading cycle, I rerun the system, and we do it all again. We’re constantly refreshing the portfolio with the strongest stocks best positioned to keep running.
So, when will I sell Micron, Applied Materials or Western Digital?
I’ll sell them when they no longer rank in the top 10.
That could be this coming Friday… or it could be months from now.
But until my system finds 10 stocks that rate higher, we’ll stay long and strong.
Is Energy Still Investable?
As I write this, energy stocks are continuing to lag, and investors are moving on from the Iran war. Vice President JD Vance is currently in Switzerland negotiating a permanent peace deal with his Iranian counterparts.
So… what would a formal and permanent end to hostilities mean for energy stocks?
As I’ve said consistently since the conflict began, it’s a mistake to trade headlines. There’s just too much noise, and the news can turn on a dime. For all we know, Iran could reclose the Strait of Hormuz tomorrow.
Don’t waste your precious mental bandwidth trying to handicap those odds. Instead, follow the system.
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.
After the massive rally this year, finding energy stocks within 10% of their 52-week low was impossible, so I loosened that criteria. Here’s what I came up with:
My system is telling us that we should be buying this dip. Of the nine stocks that took the biggest beating last week, all but two rate as “Bullish” or “Strong Bullish.” Not a single one rates as “Bearish.”
I can’t tell you when the peace negotiations wrap up… or, frankly, if they do.
This may end up being a tense, frozen conflict that drags on for years. We just don’t know.
But I do know this. My Green Zone Power Ratings system still sees the energy sector as attractive.
So, until something changes, we should continue to buy the dip.
To good profits,
Adam O’Dell
Editor, What My System Says Today
