This Nvidia-Backed AI Stock Soared 103% Last Week—Watch These Key Levels

Key Takeaways

• Applied Digital shares are likely to remain on investors’ radar screens after more than doubling last week following news of a deal to lease data center space to AI darling CoreWeave
• The stock has formed a cup and handle on the chart, with the price staging a decisive breakout above the pattern’s top trendline last week, potentially signaling the start of a new longer-term move higher.
• Investors should watch important overhead areas on Applied Digital’s chart around $17, $28 and $46.70, while also monitoring a major support level near $10.50.

Applied Digital (APLD) shares are likely to remain on investors’ radar screens after soaring last week following news of a deal to lease data center space to AI darling CoreWeave (CRWV).

The company said it expects the deal, which will see it host CoreWeave AI infrastructure at its Ellendale, N.D., campus, to generate $7 billion in total revenue over a 15-year period and accelerate its strategic expansion into advanced compute infrastructure. Both Applied Digital and CoreWeave are backed by AI chip giant Nvidia (NVDA).

Applied Digital shares gained 103% last week, closing Friday at $13.86. The stock has more than tripled over the past 12 months, boosted by expectations that the company sits well placed to capitalize on booming demand for AI infrastructure.

Below, we take a closer look at Applied Digital’s weekly chart and use technical analysis to identify important price levels that investors will likely be watching.

Cup and Handle Breakout

Applied Digital shares have formed a cup and handle on the chart, with the price staging a decisive breakout above the pattern’s top trendline last week, potentially signaling the start of a new longer-term move higher.

It’s worth pointing out that the rally has occurred on significant trading volume, indicating strong buying conviction from larger market participants. Moreover, the relative strength index confirms bullish price momentum with a reading just below the indicator’s overbought threshold.

Let’s identify three important overhead areas on Applied Digital’s chart to watch amid the stock’s recent rally and also locate a major support level worth monitoring during potential pullbacks.

Important Overhead Areas to Watch

Further buying momentum could see the shares initially climb to the $17 area. This location on the chart may provide overhead selling pressure near a series of prices situated around the stock’s April 2022 countertrend high.

A close above this level could fuel a rally toward $28. Investors may seek exit points in this area near two prominent peaks that formed in the chart in the fourth quarter of 2021.

Investors can use the measuring principle to project a longer-term upside price target if the shares move into price discovery mode above their record high. To apply this technique, we calculate the percentage change of the cup and handle’s “cup” and add it to the pattern’s top trendline value. For instance, we apply a 345% increase to $10.50, which projects a target of $46.70.

Major Support Level Worth Monitoring

During pullbacks in Applied Digital shares, investors should keep a close eye on the $10.50 level. Those who prefer not to chase breakouts may seek buying opportunities near the cup and handle pattern’s top trendline, an area that may flip from prior resistance into future support.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.

As of the date this article was written, the author does not own any of the above securities.