INFA (Long) - AI play with a robust baseFundamentals
The market right now is full of companies acting like prime AI bets . From what I can tell, NYSE:INFA is one of the more legit ones, building an AI-powered platform for multi-cloud system
The valuation is slightly stretched but that is to be expected in a hot sub-sector. Hence, we need to gauge it against the industry, where INFA is exactly at the average
Sales growth has been reliable and strong over the past decade, and the firm is nearing profitability
Debt is stable at 1:1 ratio with equity. One fun fact is that CEO's compensation is $32m a year; the average in the industry is $8m, That's a major red flag, but we do not really care in a 6-month window; just something to be aware of
On this one though, we are here for the technicals
Technicals
The technicals on this chart are gold
Starting, as always, with a robust base which has accumulated over a longer time period
The break out of the base came on news of blockbuster earnings , which is the kind of support a name like this needs
Because of the positive news, the move was accompanied by higher-than-average volume as depicted on the graph
Indicators also further support the break : (i) volume, represented by Chaikin Money Flow, has been showing divergences long before the move actually happened (orange circles) and (ii) a factor I consider crucial, a high relative strength against the market; the indicator is clearly breaking out and pointing higher
Momentum is strong (stochastics) and supported by the rally in the broader indexes
The stock clearly broke through all the moving averages ; another important factor when looking for an uptrend with legs
Trade
On the daily, the trade is slightly stretched. However, it still provides a good entry considering the proximity to the breakout line
Ideally, the stock would oscillate around this line for a couple of days and let the moving averages catch up with the price
It is up to you whether you wait or enter here. I choose to wait just because I feel the price action in the whole market needs to consolidate for a few days
Caveat? The stock does not hold the line and breaks lower. However, considering the magnitude of the move, it is not unrealistic that this happens. In that case, I would wait for the price to break again and re-enter
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