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.
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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.
Money Report
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.
