Apple Bears Were Wrong
Traders came in slightly cautious last week… and it turns out they were wrong. Because the broader markets, led by Apple (AAPL), hit a string of record highs. SPX Bullishness Bounces Back Last week, just 56% of traders were bullish – the lowest reading we’ve had since launching the survey in October. With the market rebounding, bullish sentiment pushed up to 67%. Bitcoin Sentiment Steady Traders remain ambivalent towards Bitcoin, with bullish sentiment at 55% for the second straight week. And as you might expect, the downtrend has traders more wary of Bitcoin. Apple Doubters Proven Wrong Last week, just 53% of traders were bullish on Apple (AAPL)… but the stock proved the crowd was too pessimistic as it hit a string of all-time highs. Bullish sentiment rose to 63% for this week. Tesla Bears Back Off Last week, just 36% of traders were bullish on Tesla (TSLA). This week, that number is up to 54%. Unfortunately, Tesla is selling off today. Gold Flat Gold sentiment is essentially unchanged from last week, with 55% of traders identifying as bullish. Oil Bullishness on the Rise Bullish oil sentiment rose for the third straight week to 64%, even with crude oil slipping.Save BIG With Our Customer Appreciation SaleClick here to learn more!
Continue Reading -->Scott Redler’s Dog Bytes: 6 Big Tech Names I’m Watching
SPX futures are +15. Last week the index digested above the 8 day after reclaiming all the moving averages. We’ll see if it holds 4713 and builds or fades. It’s a tape of “haves and have nots” which has some traders frustrated because only a few names are driving the action. We’ll see if that changes.Now let’s dig into some of the big tech names I’m watching: AAPL got back in charge as it cleared $152 and $157 back in mid-November. It has been special since then. I did well with calls and stock. It got a double upgrade and is above $179.63 this morning. I’d trim into strength and wouldn’t start a fresh long up here because it’s extended. That doesn’t mean it’s an easy short. GOOGL is back above all the moving averages. It held the $2900 area all week. Some are long vs. that range. A close above $2980 opens the door for a test of all-time highs, or even more upside.AMZN is trying to rebuild after holding the 200 day. It’s still not special but the longer it holds the $3410 area, the higher the probability it clears $3549 with the next spot above near $3675. I might put on a macro call spread for late January if this channel finally wants to resolve higher.NFLX lost special status weeks ago. Recently it held the $594 area. Maybe it works vs. $606 for a move to $632, but it’s not very compelling. QCOM has a nice technical set up. Some are long vs. $180 to engage it. Others are waiting for a strong volume move over $188 to break out to new highs. RBLX is getting very loose and wide. We’ll see if it can get tighter and hold the $113 area to get constructive again.Positions Disclosure as of 12/12/2021 at 8:03 a.m. ET
Continue Reading -->When to Exit a Winner
When your trade is going well, when do you get out? How do you know it’s time to book that profit? The answer depends upon the type of trade that you’re involved in. I categorize trades into two groups: with the trend or against it. Watch the video or read on below. What is a trend? An uptrend is a pattern of higher highs and higher lows, while a downtrend is a pattern of lower highs and lower lows. If a stock or index is in an uptrend and I’m long, I would be with the trend. If that name is trading down and I’m buying it, that would be a counter trend trade. I have a different plan for each trade when it comes to exiting for-profit. One of the key things to remember about trends in the marketplace is they tend to last longer than anyone expects. It’s a great rule to assume that whatever trend you’re looking at will last forever, until it shows you that it’s changing. 1) With the Trend Strategies When taking a trade that is with the trend on the upside, my reward is theoretically unlimited, as the S&P 500 has trended higher over the course of its entire history. When taking a trade that is with the trend on the downside, the maximum possible reward is just 100%, which would mean that stock goes to $0.00. When you’re with the trend, look for continuation chart patterns such as bull flags and bull pennants, with all of your moving averages (short and long term) sloped upward in the same direction as the trend. Trailing your stop when you’re with the trend, based on the pivots of higher highs and higher lows, can help you maximize your reward. 2) Against the Trend Strategies If I’m against the trend, I often exit on the way up. When I’m looking for a retracement higher to certain points, I like to utilize an 8 and 21 EMA (exponential moving average) to show me technical equilibrium for any stock or market that I’m looking at. If I’m going counter trend and I get a bounce back to the space between the 8 and 21 EMA, that’s usually a great spot for me to book the majority of my position for a profit. Then, maybe I’ll hold a smaller percentage of it — 10 to 25% of my original core holding of that counter trend trade — just in case that retracement actually becomes a reversal. Managing the Position with Trailing Stops I don’t always want to completely exit out of a position when it’s going in my favor. Rather I’d want to maximize my reward by implementing a trailing stop system for a percentage of my core position. A trailing stop system will allow me to slowly raise my stop, locking in more profits over time. Eventually, when that trend does change, I’ll get stopped out of the position for a win. Ideally, you want to give the name as much breathing room as possible to maximize reward, but always keep the proper stops in place. That’s how you can get the unlimited reward I’m always telling my team to focus on with their trading!
Continue Reading -->How to Think About Moving Averages
Moving Averages are NOT Support or Resistance One of the most common mistakes I see from people who are getting involved in trading is they think moving averages are support or resistance. This is not true. Moving averages are just averages. They’re little squiggly lines in your chart that are composed of the average of the last however many bars the average calculation is measuring. For example, a 20 simple moving average is the average of the last 20 candles, or 20 periods, on the timeframe in which you are looking at. While these moving averages are not support or resistance, they can be powerful tools if you use them correctly. For my own trading, I look at an 8 and 21 EMA (exponential moving average). I also look at 20, 50, and 200 SMA (simple moving average) particularly on larger timeframes. Equilibrium (8 / 21 Exponential Moving Average) The space between the 8 and 21 EMA on a chart represents what I call technical equilibrium for the marketplace or that individual stock. If a stock or market has moved far away from its 8 / 21 EMA, I would consider it to be extended from equilibrium. Understanding extension in markets is really important for evaluating risk and proper entry / exit spots. If I’m buying a stock that’s extended, I’m going to have a worse risk-reward and a lower probability of success on the trade. Pivot Points with Equilibrium (Higher Highs & Higher Lows) I also utilize the 8 / 21 EMA to gauge where a stock might create a higher low. For example, a new pivot point to continue a trend. When looking at an extended stock I think, “alright, the stock here is extended because a lot of momentum came in. I should be patient. Maybe a bull flag comes in, which would be more of a time correction that allows those moving averages to catch up.” Once the moving averages have caught up to price, a trade in that name may have a better risk-reward and higher probability of success. SMA (Simple Moving Average) The simple moving averages I like are the 20, 50 and 200 SMA. I use them on larger time frame charts, such as daily and weekly charts. For me, the most important part about the SMAs is the slope of the moving averages. Are they pointed higher, sideways, or lower? Are they crossing over each other? Or are they all telling me the exact same story, such as a rising 20 SMA above a rising 50 SMA above a rising 200 SMA? The simple moving averages tell me the essence of the trend for that timeframe. There are about 20 trading days in a typical month. If I’m looking at a 20 SMA on a daily chart, the direction of the slope of that moving average tells me the nature of the trend over the course of that last month. The 50 SMA measures about the length of a quarter. I call it my intermediate time frame when looking at a daily chart. The 200 SMA measures around a year. This is a really important moving average. It represents the long term essence of the trend for any stock or market. Putting It All Together If I’m looking at a rising 200 SMA, above a rising 50 SMA, above a rising 20 SMA, I know the essence of trend for every time frame is the same. All are trending higher. Generally, if I’m going long an uptrending stock or market, I’ll have a higher probability of success than if I’m going long a stock trending downward or sideways. Again, the key with these moving averages that people need to understand is they are not support and resistance levels. They are tools to help identify trends on different timeframes. If you can learn to utilize moving averages, they can be very powerful for your trading. They can help you understand risk, reward, and probability of success for any trades you take.
Continue Reading -->What is a Short Squeeze?
A short squeeze is forced buying from short sellers who are already in the marketplace. A short seller is someone who is trying to profit from a stock going down. When buying a stock, the worst thing that can ever happen is that you lose 100%… but in short selling, you have unlimited risk. Stock can go up hundreds or thousands of percentage points – especially if the stock is getting squeezed by forced buying from short sellers. The GameStop Squeeze Short squeezes became in fashion earlier this year in January, with the WallStreetBets Community focusing first on GameStop. GameStop had a short float, a short interest of 140% of the outstanding shares. Due to naked short selling, hedge funds were shorting the stock on the stock without even borrowing it. When the WallStreetBets community recognized that, they all started buying. Their buying caused the stock to go up, resulting in some of the shorts starting to get squeezed. When that happens, you get a virtuous cycle of buying. That’s how we were able to see GameStop go from the price of about $20 to $500 in a matter of days. Other Notable Short Squeezes We also saw short squeezes come into a lot of other stocks – $AMC $SNDL $BBBY $BB. There’s been a constant rotation of these mini short squeezes we’ve been seeing. GameStop itself has had three major squeezes, AMC had two major squeezes. My team and I now are paying attention to stocks that have high short floats. Anything with a short float above 20% is in squeeze territory. Some of those layers of probability also apply. If we’re seeing the heavy volume along with momentum coming in, that could be the beginning of a squeeze. Risks in Short Squeezes Being too late A lot of these companies are not necessarily the best companies out there, fundamentally speaking, and it’s probably why they had really large short interests. Once the forced buying is done, there’s a real risk that the stock can go right back down to its more fair, fundamental value. We want to make sure to get in on the ground floor of that squeeze – getting involved early – before it’s gone up a couple hundred percentage points, and when the technical setup was still there. If not, you risk buying in too late at too high a price and losing the very next day. Secondaries (Capital Raises) An IPO, initial public offering, is when a company’s shares first become available to the public. They can always add on more shares to that IPO by doing a secondary. A secondary offering is when a company decides to utilize their stock price to raise additional funds for the company’s operation by offering out additional stock. Now, let’s think about what secondary offerings mean from the perspective of supply and demand. Demand is coming into the stock, and some of that demand might be from the short squeeze. You also have a limited number of stock supply, which is what we call the stock’s float. Now, when you do a secondary offering, the overall stock float will increase. If you’ve got the same amount of demand, and all of a sudden, you’ve got much larger supply because the float is increased, that stock will most likely go down. AMC’s Secondary Offering That is exactly what happened to AMC. Many people don’t realize that a secondary offering actually caused the top of AMC. AMC had that crazy short squeeze on June 2. It was actually the second short squeeze in the name. In one day, it went from about $35 to $70+. Then they announced a secondary offering the next morning, and the stock went all the way back down to $38. Something to keep in mind regarding a lot of these companies…why were they so heavily shorted to begin with? They’re usually strapped for cash, don’t have strong balance sheets, and possibly even lose money year over year.
Continue Reading -->Probability in the Stock Market
Finding the risk/reward probability of a trade is simple math. But most people don’t talk about the other side of the formula: probability of success. Probability is very dynamic and not as straightforward as risk/reward. In this video, Derrick will walk you through what he calls the seven “layers of probability” – all of the factors that will increase the probability of a successful trade. Get all of these layers in order and you can improve your chances of success.
Continue Reading -->5 Things You Should Know Before You Trade
If you’re just getting started in the trading business, it can all feel overwhelming. There’s a lot to learn, and much of it comes with time and experience. But Derrick Oldensmith has a few tips that he’s discovered over his more than 10 years of trading. Check out the video below to learn the 5 things you should know before you start trading and use Derrick’s experience to your advantage.
Continue Reading -->Options In Play – Earnings On The Radar Week Of 12/10/21
Risk-off action is hitting the market right now and it is creating higher volatility around earnings. With the calendar getting lighter for earnings, the names scheduled could get more attention now.
Continue Reading -->Scott Redler’s Dog Bytes: What’s Next After the Storm?
SPX futures are +10. The Oscillator is -75. Last Friday, the index held the 4500 area again. It’s not a great setup. We’ll see if the early strength holds or fades. The 50 day is 4570 with bigger resistance at 4610ish.Now let’s dig into some of the big ETF’s I’m watching: On Friday, SPY held the $450 area again. We’ll see if today’s early strength holds, or fades. $456ish is pivot resistance and big resistance is above at the $460 area. A strong close below $450 opens the door for another leg lower. QQQ is showing some relative weakness this morning after it gave signals to take down risk the past few weeks. We’ll see if it stays below $383.34 and how it handles Friday’s low of $378.90. The 100 day is below near $374. We’ll see if it pulls SPY down or reverses higher to relieve some pressure.IWM’s breakout failure resulted in a move down to the $212 area. It’s up small this morning. The longer it stays below the $220 area, the higher the probability it breaks to the downside with $209 as the key area. That would be bad for the macro condition of the market.Semis were trying to hold up. This morning they are showing some relative weakness. If SOXL breaks and closes below the $59-$60 area, it won’t be good for tech. My XBI call options haven’t worked because this sector has been down for 20+ days. The ASH Hematology conference starts this weekend, but hasn’t been a driver. We’ll see if that changes soon.Positions Disclosure as of 12/5/2021 at 8:06 a.m. ET
Continue Reading -->Breaking the Market Trend
The market looked like it would roll over bearish last week, and it did. So now the SPY is testing the 20 ma and Sami thinks that it won’t hold like it has in the past. Find out what he’s predicting the market will do in the coming days. In this video, Sami explains: – How to find a head and shoulders pattern in QQQ – Which stocks are unaffected by the market selloff – Where CIEN could go if it takes off upward – Why he changed his sentiment on OLMA – What the next few weeks could look like for EH
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