Transcription
The market staged a massive reversal today after gapping down, as it looked like we were going to start with this blockade. You had a breath that got increasingly stronger as the day went on, and they started to buy certain tech names and puked others. There's certainly a group here that's getting left behind. So, let's get to it.
Before we get into any of the details, I just want to point out that the NDX is clearly outperforming at this point. Whenever we see this, we look for the relative breakout, and it tells us a lot. But they're being very specific about what they're buying. So, let's get into it.
27.5% of you do not subscribe to this channel, but watch for the past 30 days. That's what we're up to now. It's interesting because it keeps staying around that level. Subscribe, click all notifications. What we go over here is extremely timely. It's all linked together. And I overlay indicators specifically for the environment that you're trading in. And I'll give you a great example of this today.
Now, when we start to see the Qs outperforming the spy, that's exactly what you want to see. And it's an extremely healthy market when that happens. Anybody can do this. You can do it yourself. QQ divided by the spy, and you can see the breakout and the higher high. And this is when it happened. It happened today.
What's so interesting about this is we were expecting Armageddon when we were coming in, and we all saw this. We started last night here on the open. And then from that open, if we just go and take a look at the high of this bar, you'll see it was 146 points or 2.16%. Why do you care? Why is this important? Because they actually bought the dip even before the news came out because they knew that there was going to be some kind of agreement or something was going to come of it. And what we have right now is we have talks. A second group of talks is slated for next weekend. Pakistan has come out and said that, and that's exactly what we're looking for.
If you take a look at the level here from that Sunday from when we started to break out, you can always see that 6:00, 6:00 p.m. Eastern Standard Time level, and then we ripped, and then you can kind of see the retest. And then let's get to the opening of the market because I think that's really very telling. So, you can see it right here at 9:30, and you had a big move, then we started to break out. But it's the 12:00 that you need to pay attention to.
Now, if you're in the community, you already know this. If you're trying to get in, please look for a letter. There should be a group of letters that are going out tonight. But if you look at this 12:05, this is exactly what we were talking about earlier today. And I'm just going to show it very quickly so that you can do it for yourself.
So if you go and take a look at this level, there's something called CTAs. Now, CTAs are funds that are systems. They're systematic funds. They have to buy when there's a trigger. So, at that level right there, if you go and take a look at the VIX at 5:00, you'll see this red arrow right there. Once we broke that red arrow, and you can see we have the little bell right there, the alert. But when you came to that level and you finally cracked that 20, that was it. From there on, it was just straight dumping of volatility and protection. The VIX is obviously puts. So, when you start to see that sell down, that's exactly what you're looking for. And then from that area, CTAs, when you broke 20, were forced to buy. And there's a certain amount that they have to buy based upon that, and that's exactly when we broke out, and since then, we never looked back.
We went through this in the public pre-market that we do every morning between 8:15 and 8:30. This was our call wall, and we could see at the end of the day we went through that. Now, what does that mean that when you go through that? That probably means that the majority of the call wall was built with one thing. It was probably built with short-term calls, which means they'll probably roll it up tomorrow. But this is very bullish on what we're seeing going on out there. Whether this gets done or doesn't get done anytime soon, there's one thing that we know. Both sides are talking.
Let's get to some names and what's going on out there. We're seeing shorts have massive short squeezes, like massive. We brought this up actually in the Saturday video about two weeks ago, and we actually have this as an alert in the room. I've gone through this a couple times, but from that breakout where we actually got above this level, that's where everybody was going to have their kind of, "Okay, I need to make a decision." And we broke out from there. It's 176 points, and it just keeps pressing. You still have over 52% of it is short. Meaning 52% of the float is actually short. The float is actually increasing its short position as this is happening. That's not how this ends. It ends with a decrease, not increased volume.
So I want to go through this so people understand this because a couple of the guys in the room that are trading this also were trying to figure out how to get out of this. I'm going to give you a really a clean way to look at it. So, it's not perfect, but it's a great way to look at the market. When you see something like and you're pushing and you're looking at all this volume going, "I need to get out." If the short interest of the float is increasing, while the volume's increasing, that means they're shorting more. It doesn't mean that they're getting out. If you start seeing the percentage of short float as it's going higher is decreasing, then they're getting out. Really simple thing to watch. So, when people are trying to stay in these, that's one way to look at it.
Another way to look at it is just look at the ATR. And I'll show you how I tend to do this. We're just going to go to a regular ATR for a minute. And it's a real simple way to do this. It's not perfect, but it'll keep you in it. So, here you can see the ATR right here. Average true range. And that's going to get you to 26.89. So, it's ATR, average true range. And I'm just using the simple one here. I have one that I use, but we're going to just use the one that that's already set for everybody. So, you're at $26. So when you see this start getting above 26, 27 on a day, now tomorrow you'll get a new number. If you go from the close from that level and you go up to 26, 27, so there's one ATR up there, 333 roughly is where one level is. So we're going to mark that off. Once you're above that, there's a 70% chance that that's pretty much the range on the day. It doesn't always work that way. But then if you know that you're one of those kinds of guys or one of those traders that's discretionary, and we all have our things that you know that when it pulls back you're going to sell, you start using a trailing stop on the rest of it up there.
And I'll show you this so that you can get it. So it actually fit perfectly there with that one ATR off that level. And you can see how it's pushing. So that when you start riding up, if you start getting something trailing down, whether you're using something, if you're in the room and you're using like the private cloud or you're using, let's just use a 12 SMA just to make it simple, and you break a 12 SMA on a 5-minute or even on a one-minute when you're up here, then that's when you go. Yes, you're not going to get the rest of this, but you're going to trail out with a system and a process that will consistently work for you. Because what you don't want to do is you don't want to be one of those guys that should have been selling here and then when it's at 290, which you could 100% do. Let's be honest about this. You don't want to be getting out here if you know that you're going to be one of those types of guys that wants to get out when it starts to pull back. Real simple way to do that. You might want to listen to that again. It will keep you in for the majority of the move. Is it going to keep you in for the last dollar? No. The only person that gets the last dollar is the guy on Twitter that's going to tell you about it from his mom's basement as he's eating hot pocket.
Even something like SanDisk today, which we had an absolute monster trade in. I'm going to actually walk through parts of this for you tonight so that you can learn how to do this for yourself. But you see where the ATR here is at 60 on the day, the average true range, which means that I have about a 70% chance of going there. So, when I'm breaking through these different bars, I'm going to leave this all here for a minute because I'm going to come back to it. But when we are here and we're up, all right, now you're just bothering me. Hold on one second, and we'll do it this way. And we'll come to there and we'll look at that and go, "All right, well, we're up 46 on the day." And I'm just using it from where we opened. Realistically, you want to use it from where the previous close was. And then on this time, it looks like we're roughly around that. Let's go find out what that level is. 60. All right. Good. So, we come to that 60 level. And then once you're up here, if you know that you're somebody that's going to come out and get ready to get out of that at that 841 level, then you would just mark that off at 841. And then if it starts to pull back there at any point during the day, you just get out of it. No different than you would do here or the next day. It gives you a really clean demarcation line.
Now, today we did a trade in this. And why these trades are working so well, this one's working for a different reason. I'm going to get rid of the ATR, but that's definitely something in an environment like this where you're getting these oversized moves that are due to squeezes like you had in Oracle today with the news that they had. We'll get to that in a minute. It's still moving after hours. But what you're doing is you've putting a trail on it after it gets to a level that is an outsized average daily move. And a lot of these moves are so great, you're trying to stay in them and you're trying to find a way to stay in them.
Now, this was one that we marked off from that move all the way down to the open after we pulled back and retraced. And we marked that off to get us a clear demarcation line on where our target was. Let me walk through this really quickly on why we thought that this was going to do what it did. So the first thing is it was added to the NDX, but what they did, and that means you're going to have forced buyers. So when you get added to the NASDAQ 100, you're automatically going to get forced buyers. And that's why this name, and this is why I always tell people to subscribe if you listen if you don't. But the point that I'm getting at here is I try to go over stuff that's actually happening instead of so that you can learn how to use this. Let me just drop that right there and hope it doesn't open. All right, cool.
So, where I'm going with this is why would did SanDisk outperform today? People don't understand. The reason is because you had forced buyers because of what was happening with SanDisk being added to the NASDAQ 100 because they know that the indexes and the index ETFs and the levered ETFs are going to have to buy it. So, we marked this off. Why did we think that it could actually achieve this? Besides that, they had sellers. You had tons of people selling puts in the name. So, we know the implied volatility. For you option traders out there, you know that the options on this are just absolutely insane. Go and look at a 950. I think they were at, I think before you were even there, the 950s were just absolutely through the roof today, right? That was just absolutely insane. If you're an option trader, you know what I'm talking about. They're just crazy. I think they're at $40 right now. And obviously, you can see where you closed, and I think the thousands were at 25 at the close.
But here's where I'm going with this. They're selling puts so that they have exposure to this, meaning if it drops down, they're going to get assigned the stock, and meanwhile, they get to take in the premium if they don't. As they're selling puts, what that does is it starts to put a floor into the stock because when they sell puts, they are selling those puts to a buyer. That buyer is the option market maker. That option market maker has to go offset that trade. When you sell a put to open, not to close, what do they have to do? They have to go out and hedge the delta. How do they hedge the delta? They have to go and buy stock or they have to buy calls. Whatever they have to do to hedge that delta out because they want to be delta neutral. So, as they're selling puts, they have to go and balance that out. That balance puts a floor in here.
So, here, let me walk you through parts of this. So, I'll show parts right here. These were different trades we did. So, added 8.98, 8.98. We added again, traded around, and I just said I'm going to add, trade around it all day. I started earlier. I got stopped out of a portion, and then I just started trading around a bit because of the volatility. Especially when I saw that they were going out there and they were selling puts, and they were not selling a little bit. They were selling millions of dollars of puts, and as soon as we saw that, it made a lot of sense, and then we just added again to it, and I just put it out there very clear based upon the measurements that we could get to 950 today. And you can see the time stamp from John, the moderator. He types, "Why I trade and talk. I can't do it all. I know people think I can, but I just can't." New high of the day, they're just going to keep grinding it. And we knew that. Why? Because of this mechanism.
Because when the volatility of the option is so great, they don't really want to buy. Meaning, when I say "they," people will say, "Can I, in your comments, you'll say, when you say they, who are you talking about?" In this case, I'm talking about the option market makers. They have to go out there and do this. When I say, "Who's they that's selling puts?" It's institutions. They're looking at this and going, "I really want some delta exposure to this, and I'm going to get it through selling puts." So, I have exposure, but I don't really want to go out there and buy the calls, and I really don't want to buy the stock. And that's why you have a floor. And that's why you get this kind of grind higher, and then it'll sit at a level, and then it grinds higher, and then sits at a level. And now after hours, you can see the games will begin, and we'll go from there and see how we open up. And this is me following up during the day. I've not trimmed from today's live day trade. They're just tags that people see when they're in the community so they know what I'm doing. And I'm just walking through it. I'm saying that my target was just the top of the fib level, and we got there.
Now, at the end of the day, it became pretty clear that there was going to be buying. And how are you going to tell that at the end of the day? I'm going to show you exactly how you're going to do this. This is turning more into education right now, but I think it's important because of the environment you're in. So, here's 350. Market on close is when he has all their orders. The specialist, they have all their orders. They have to have them in by then because if they want to be out of the trade, so if they want to be out of the trade, they have to go, "Hey, market on close, whatever I get, meaning buy or sell, whatever you're going to do, right?" So that way they know that they're in the trade no matter what. So, market on close, 4:00, they want to make sure that they own the stock. So you can always take the 350 bar and use that as a demarcation line. And what they did here was they tried to pull the flim flam. "Oh, you better get out." And then what they do, they reverse it and they flip the 350, which just allows you to use that as a stop if you want. It's very clean trade. And then you can just see how that played into the four o'clock. So once they flip the 350, it's pretty rare, but it will of course happen, especially with algorithms. So you see that, then you kind of go from there. You can always just overlay the volume of that bar as well and just kind of see, "Oh, they tried to get it," and then you can see the buying just coming in right behind it, and then it's marked by that 4:00. So it tells you which way they're leaning.
Once you see something like that, that's when I came out and just said this like, "Hey, I'm just going to hold it because I can see what they're doing. I can see that they're playing games." Now, just I'm just telling that John's just telling them because I'm talking again during that period of time. Why is this important? Because understanding this mechanism, if now that you understand this and you go back and rewatch this again, you know why we're still in this from 950 and why we just made another $23 in the trade. That's why. So, that little mechanism will carry you through those two mechanisms. If you go back and rewatch this in this kind of environment will save you an inordinate, I can't stress this enough. I'm trying to figure out the right word, and an immense, that's the word I want. What's the word we're going to go with for tonight? Immense. An immense amount of aggravation. It will save you so much aggravation because you're not getting out. You're not getting head-faked. You're understanding the times that you're supposed to be looking at this, and you're understanding how you're supposed to be gauging not only targets but how you can see and say, "Hey, am I staying in that ATR range or am I not staying in that ATR range?" Long answer to it. I think it was worth me leaving that in. So, I'm not going to edit any of it out, and we're just going to go from there. Cool.
What are they buying? They're buying the socks. Are they buying everything? It looks like they're buying everything. They're not. So, what we saw today also was the push of AAOI and some of these lights. I just want to say that they're not really rushing into some of these optic names anymore. And the answer is why? Because when they're behind, they're chasing and they're buying high beta. They don't need to chase anymore. To them, when the VIX collapsed, I'm not the only one that watches CTAs, guys. So, when the VIX collapsed and broke like that, they know that CTAs have to step in. So if they know that CTAs have to step in, and I know that they don't have to go out there and just buy high beta, and so they're looking at this going, "Well, do I really want to buy high beta names anymore? I don't have to because the VIX collapsed." So they're going to have to come back into the market. Therefore, I can start buying some of the growth names that I want to buy. And that's why you're seeing other names like MU come in. DRAM names are starting to rally again. This DRAM ETF is hitting highs. And even if you start looking and saying, "Well, that doesn't make any sense because nothing's solved." Well, look at South Korea. South Korea has the highest close that it's had since this began. So, the fact that these guys are out there talking is driving the ship.
Now, IGV, which I am still short against the SO XL trade, it's bouncing. Now, why is that bouncing the way that it is? Well, a couple things. Number one, yes, oversold are going to bounce for sure, but names like Oracle came out today and showed how their products aligned with AI are going to save people like 17 or 20% on their electric bill. It's pretty fascinating stuff, actually. But the volume on this move was substantive. And when you see something like that here, we'll just drop it here like it's hot, like the kids still say, and we'll go from there. And you can see that coming straight across. And that's going to be one of your biggest bumps that you've ever had. It's also going to be the first time that you're going to have closed over the 55 since this has begun. You have not closed over the 55 since you broke it in October. So, a lot of people are going to look at that, and they're going to look at the IGV names. Whether that's right or wrong, you have to make your own decisions. I'm not that interested in those.
I did try a couple times to short PLTR today. Candidly, the short side of the market, that side really did not work for me today on the software names. It doesn't mean it doesn't catch up later, but do I really want to go out there and try to time buying PLTR and these names? Probably not. Even something like Okami, which I really like, do I really want to buy that? Like, you know, it's a move for ants. Like, people are getting excited. They're like, "Oh, I made $3." Okay, well, look at Micron and look at what you could have made from 408 on something like Micron today. Like, it, I'm not saying it can't work. You just have to ask yourself if it's worth your time. Like, it's not, it's more of an opportunity cost, if that makes sense. Like, why would I go and play with that when the socks is breaking out and ASML is coming out with earnings, you know, and I think that's what Tuesday night? So, yeah, Tuesday night that'll come out with earnings. We'll come into Wednesday morning and we'll see how fantastic their earnings are. And then you're coming into Taiwan Semi earnings as well later this week. So that's what they're playing, and that's how I would go about looking at playing this.
I could give you a litany of other things that are going on. CRDO is buying somebody, and everybody's very giddy about it. You got upgraded today. Jeffries initiated and loves it. But you're up $10 after hours with this merger. I don't know what's so exciting about this merger, but clearly it's the cat's pajamas. You can see from this morning, and then you can see when this merger came out and that news came out that they really like that news. So we'll see what happens there.
Secondary names in optics are definitely getting a little bit of love. OPTX, for example, clean breakout, huge volume, very hard to miss these kinds of things. Also ALM, which is kind of a room favorite one that we trade, they moved their location from Canada to the US, meaning their headquarters formally moved it. Those kinds of things will trigger a buy because there are funds that can't buy Canadian headquartered companies. They can only buy US headquartered companies. Hence, one of the reasons probably for the move. I'm sure there's other some other strategic areas and reasons for that as well. But from my standpoint, what really struck me was, and I sold a bunch of puts on this today, and I could do a, we should do a video on that one. So, selling puts the day after earnings because of the crush of the implied V. But the thing about Goldman was it was awful. Like, not so much just the earnings, but their trading revenue was off by a billion dollars, and it still held. And so that bodes well tomorrow for JP Morgan, and everybody got giddy buying JP Morgan today. But the fact that they're buying Goldman and it's down like this, and you're watching crude oil do what it's doing, the market is leaning towards that, "Hey, they're going to figure it out." And I think you really started to pick that up when they came out with that, "Hey, by the way, we're going to have a secondary meeting, and it looks like it's going to take place in Pakistan again this weekend."