Semis Stock Ambarella Is in the Middle of a Multiyear Breakout. Chart Points to Next Buy Level

Source: Ambarella

Inside Edge Capital Management founder Todd Gordon is backing chipmaker Ambarella for even more gains after a massive surge this year.

The stock has risen more than 100% in 2021, extending a rally into October with a nearly 20% rise. The SMH semiconductor ETF, which does not hold Ambarella but tracks competitors, added 6% last month.

"They're a multifaceted chip stock, they have exposure to autonomous driving, driver assist as well as it's a battery play. They're used for artificial intelligence processing of pictures and videos and specifically face recognition capability, so it's really an interesting company," Gordon told CNBC's "Trading Nation" on Thursday.

Dissecting the charts, Gordon highlights its rally into 2015 which then led to a period of consolidation. The stock began its current breakout late last year which has since taken it above its previous top set in mid-2015.

"Maybe try to buy it on a pullback here back into support," Gordon said. "It should not break back below $133 or else the premise for this is, I would say, invalid but anything back to $160 to $150 should work on a pullback."

"That breakout from this multiyear top is real so we should see more upside here," Gordon said.

Ambarella closed above $185 a share on Friday.

Gordon laid out further reasons to be bullish on Ambarella in a segment for "Trading Nation." Check out the video here.

Disclosure: Inside Edge Capital Management holds AMBA.


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