Too Far Too Fast
And Hardware Rotates Into Software On Cue
The meltup continues.
My updated SPX target last week of $7425 is clearly in view.
So is Iran escalation, but market only sees earnings beating and markets rising from the chase and unrelenting mechanical buyers still in the room.
As I cover daily in my live trading room, the leaders have done nothing wrong yet… but beware profit taking on the names extremely extended… and expect a rotation from overbought hardware into oversold software.
On that last note… this is exactly what I wrote SUNDAY for the “mid-week ahead”:
“Hardware Rotation Into Software is on my radar after AMD reports Wednesday and before Non-Farm Payrolls Friday.” May 3rd
And what happened Wed into Thursday? Massive outperformance into IGV from SMH & SOXX: AMKR, CIEN, AMD, ARM, MRVL, COHR...
While software was en fuego…
Not all semis sold off. Recommended swing long QCOM is doing gangbusters.
And CSCO looks ready to delight next week (earnings May 13th). ;0)
But yesterday I warned clients - as VXN was green with QQQ past few day - it’s not time to be complacent.
And here’s why: Nasdaq Composite has finally tagged this weekly trendline I’ve been waiting for since the ceasefire announcement a month ago. We have arrived.
Maybe it’s nothing, and we just continue the 1999 run, but for now, I’m more focused on my hardware-into-software rotation for AI-beaten down plays that have investors realizing they aren’t so bad afterall.
Case in point: DigitalOcean (DOCN) —
Chronological Summary 2026 generated from Slack AI bot:
January 7, 2026 — Channel Post (Jan 5–7 Recap)
Theme: New swing long initiated — conditional on $51.56 close
The first DOCN reference of the year appears in Samantha’s swing longs section — a brand new, conditional entry:
“DOCN — new this week but only if it can close > 51.56 and follow through for swing long that can turn trend reversal.”
This is the genesis of the DOCN trade for 2026: a technically-gated entry tied to closing above $51.56, framed as a potential trend reversal setup rather than just a short-term chase.
April 6, 2026 — AI Briefing: Trading Room Notes Apr 6
Theme: AI beneficiary with sponsorship; $51 needed to trigger buy signal
“DigitalOcean (DOCN): Touted as an AI beneficiary with sponsorship, though it needs to stay above 151 to trigger a buy signal.”
The framing has evolved considerably from January — DOCN is no longer just a technical setup but is now explicitly called an “AI beneficiary with sponsorship,” and the key breakout trigger has moved up to $51.
April 21, 2026 — AI Briefing: Trading Room Notes Apr 21
Theme: Top cloud performer; AI infrastructure thesis; “scoop pattern”; target $95–100
DOCN receives its most detailed briefing write-up to date, appearing in both the sector narrative and the Company Comments table:
In the Cybersecurity and Cloud sector section:
“DigitalOcean (DOCN): A top performer in the cloud space, benefiting from the necessity of cloud infrastructure for AI, which is less disruptive to cloud servers than to software applications.”
In the Company Comments table:
“DigitalOcean DOCN — Performing ‘exceptionally well’ and moving aggressively toward 95–100; recognized as a volatile but productive ‘scoop pattern’ play.”
Two key things are notable here: first, DOCN is explicitly categorized as less susceptible to AI disruption than software names — a structural positive for the thesis. Second, it’s in active price discovery toward the $95–100 zone with the “scoop pattern” formation highlighted as the technical driver.
May 5, 2026 — AI Briefing: Trading Room Notes May 5
Theme: Earnings crush; “hotter than hot”; $133.40 target
This is the payoff moment for the DOCN thesis. In the Technology and AI Winners table, DOCN is listed as a standout alongside Palantir’s record quarter:
“Digital Ocean (DOCN) — Crushed earnings; massive cloud storage demand. Key support at 51.69; target 133.40.”
And in the broader narrative context, DOCN is described as a cloud storage “breakout stock” that is:
“’hotter than hot’ with a target near $133.”
Summary Arc: The DOCN Trade
The DOCN thesis had a beautifully clean progression across the year:
+160% move — built on the thesis that cloud infrastructure for AI is structurally less disrupted than software, and validated by a blowout earnings report.
