Transcription
Price action is the ultimate decider. It interprets news and judges it. Your opinions are irrelevant. Leave your ego and politics at the door. Whatever you think about Trump and his policies and tariffs and how he's interpreting things, it doesn't matter with regards to trading. Your job is to just interpret the price action, interpret the price action, the market indexes, leaders, and do your best to participate on the right side here.
So early uptrend goal during this period is to gain exposure to the top liquid ideas to test the uptrend and then listen to trade feedback and manage your open risk and make sure that if things roll over, you know, you're not taking too much of a hit, but if things work, you're increasing your exposure to participate in that uptrend and and you know, move your portfolio forward each day. You want to kind of build a consistent relative strength list. Just, you know, make a quick list. Go through your your screens and jot down any names that are standing out in terms of holding above above moving averages, reclaiming moving averages first on a big red day in the market. You know, when the market's gapping down on bad tariff news, which stocks are staying green or staying positive? Note those type of stocks and look for themes among them.
This is Palanteer again, based above the 200 SMA, big oops reversal here, which is basically when we open well below this low right here, the prior days low, and rally back through it. This is a potential entry point. But often, you know, with extreme volatility, it's just a good sign of strength. And then we rally above the moving averages. We pull back to the 21 EMA. You could have built a position here and range breakout. And then you're on and got a nice cushion going into the base pivot. You could have held through earnings, at least part of your position, and you know, even added back anything you sold before earnings, you know, at this bar or this bar right here on the fresh breakout. So, perfect. Uh, and I thought it was really cool. Wes, you had a very similar slide to this.
Um, basically what this does is I'm plotting it here on the QQQ, the NASDAQ 100 ETF, all the kind of key uh news headlines surrounding tariffs because that really is the fundamental macro driving factor that's driving everything right now. Um, you know, in during any market period, there's going to be some fundamental um factor that's kind of impacting everything. It can be positive like the development of AI that can drive long-term trends, but often when we enter a corrective phase there's something negative overarching uh you know happening. Back in 2019 it was actually China trade wars, you know, again, then during COVID, of course it was the COVID correction uh and you know COVID was driving things as well as the economic impacts from that uh and then and so on and so on. There's always something going on in the news whether it's inflation, what the Fed is doing, that you know drives and has an impact on the market trends.
So here, as I mentioned, and let me minimize this here. Um, I've kind of labeled for each of these days when key news events took place. And let me actually zoom in a little bit uh so it's easier to see here. Hopefully hopefully Yeah, that's better. That's correct. So, obviously, as as Wes pointed out, this was uh the big day where we saw um you know, a reinvigoration of the correction because it was liberation day. The tariffs were announced uh right here. We saw, you know, one more leg down, significant extension down here. Um, and then towards the bottom, obviously, we were very short-term extended. We're due for some type of counter trend rally. Whether that was going to be the bottom, we didn't know, you know, in in real time, but you kind of have some expectation when we get so extended to this that there'll be some type of bounce that will either roll over or, as we saw here, start to form higher highs and higher lows and start a new uptrend.
Uh but regardless here on April 7th we actually had of course significant extension, but then it was kind of interesting. We had a rumor uh that was it was funny. I think it actually started on Twitter where uh there's this news account named something and then Bloomberg after that and he posted something about there being a pause about tariffs that was then repeated by different news outlets because his last name was Bloomberg on Twitter. Um, and it caused this kind of algo frenzy, which if you look at the five-minute charts or one-minute charts on that day, you can see when that tweet hit and when it got repeated over and over again. And we actually saw what the impact would be of an announcement of a pause of the tariffs uh and what impact it would have on the markets. We saw a crazy rally here. It did fade obviously into the end of the day when that rumor was debunked. I think there was some news out of the White House that that was false. But regardless, you got to see what that type of news event could actually have uh what what kind of impact that news event could have on the markets, which then we saw two days later uh happen for real.
So, the next day, still very volatile inside day. And then here on April 9th is when we had that 90-day uh pause of the tariffs announced. And also if you look at the intraday charts here, just the incredible rally that took place um off off those lows reconfirming uh you know the start of a potential rally. At that point kind of my mindset is this is a important local low. Who knows if it's going to be the low of, you know, the downtrend, but at that point, that is the significant level to trade against to think about and measure higher highs and higher lows versus um after that period, there's kind of a week where we just have sort of kind of uh digested this massive bar where we consolidated within it. We tried to push the 21 EMA on the QQQ here. Rejected down. We had some gaps lower. Uh but then here on this day, uh we gap lower and close off lows and then reconfirm higher the next day. And this is the first follow-through day uh that Wes and and Roy mentioned. And here we got our first kind of glimpse of positive news after this one here. And it's amazing how it kind of lines up with the technicals uh here on April 22. Trump uh and and uh Wes mentioned also uh what what uh what his cabinet me me cabinet members said as well. But here Trump said China tariffs will drop substantially, but it won't be zero. So a positive message. We don't know what the resolution is, but we get the first hint of really positive news regarding uh the relationship with China because at this point we had kind of positive news with everybody else, but China was still the dominating factor and of course it's probably the most important uh country with regards to the tariffs uh with regards to how much it's integrated into our economy and the world's economy.
Uh so that uh sparked this follow-through day here and we didn't just have one day of strength. We had followthrough to the upside gapping above the 21 EMA. Did close below it, but the next day we saw reconfirmation to the upside. And then here on April 25th, we get our kind of next batch of good news regarding uh the uh the the China negotiations. Uh I said here who called who because there's some back and forth about whether China started negotiations or Trump started negotiations. But regardless, it was just kind of positive sign that there was some communication, there was some negotiation back and forth and that talks were resuming. Then on April 30th, if we move forward, uh we had a gap down and gap downs shortly after the start of new uptrend because how I define it and we'll talk about market cycles later on is when we pop above the 21 EMA and stay above it. This kind of started the new technical uptrend for me.
Um often early on, you know, four or five days in, we see what we call a stress test where we see a significant down day. You know, the the leaders maybe down 3 4% in the morning and how the market handles that type of stress test um kind of tells you a lot about the strength of the market and the strength of the market leaders as well. And we definitely passed a stress test closing right near highs. Um all all the stocks that were acting well, Crowd Strike, Palanteer, uh they rallied and and closed near highs on that day and and just acted well. Um, so after that negative news event, GDP contraction, weak jobs number, all related to tariff uncertainty, we close strong, showing that the market was kind of brushing that off. And that's definitely a positive sign when the market ignores negative news related to the dominant fundamental factor. After that bar, we got some nice followthrough up uh towards the 200 SMA on the QQQ and didn't really have too much news until May 7th when uh the Fed maintained interest rates, citing economic concerns. Again, kind of a negative news event, but the market closed well. We saw followthrough to the upside and then tightness right below the 200 SMA. And then the weekend hit and we had the first batch of really significant resolution uh news about China US uh deescalation agreement over the weekend which you know was implemented over the past few days and that's been the most recent development so far um causing this really strong gap up above the 200 SMA and significant fall through here.
So you can kind of see how um you know the negative news gets announced and then we kind of brush it off and even before the news is completely resolved uh and um you know completely completely fixed the market has looked forward and seen that there's light at the end of the you know at the end of the tunnel and started to form higher highs and higher low here higher low here higher low here higher low here and so on reclaiming the moving averages as we go. So that's kind of a fundamental view noting some key dates and events here um that I think is always cool to look back because every correction is similar. Um if you go back and do this exercise with the COVID uh correction, you'll see how uh you know very similarly before there's resolution about um econ econom economies you know reopening states reopening you know we had already bottomed and we're well underway and the market looks forward and that's one of the key things I want to pass on to you guys in this presentation and this this tweet that I put out actually on this day right here which was funny enough the day before we got that kind of reconfirmation positive news that really started this move higher.
Um, this this tweet here kind of sums up how I kind of interpret things. Um, and I I'll just read it because I think it's a it's it's it's a good review here. Um, I view the markets through the lens that price action reveals all. Uh, currently we are in a longer term and shorterterm downtrend below the 200 SMA and 21 EMA. I do consider the current dominant dominant story that defines the risk environment. Right now, it's tariffs and trade deals uh trade deals. I'm no expert at these topics. However, the market looks forward and will show when it sees hints of light at the end of the tunnel. When it does, we'll reclaim moving averages, form higher lows. Price action will tighten and individual leaders will set up and stand out likely before all the news is resolved and look sunny.
Uh, and then kind of the next day that actually played out pretty well as we got reconfirmation of positive news. We reclaimed the 21 EMA, started forming more higher lows, respecting that 21 21 EMA to the downside, brushing off negative news as the market's looking forward, reclaiming more moving averages, the 50, the 200 SMA, and continuing higher and starting a new uptrend. So, this is kind of how I interpret all market corrections. There's always something going on. Uh, but you always want to kind of put your opinions aside and just look at what the price action is telling you and especially what the market leadership is telling you and just listen to price and and your rules and that will help you um escape the worst of corrections and participate during the best of uptrends.
Um, and then here on this slide, let me get a quick sip of water here. Instead of a fundamental view, I transitioned more towards the technical things that I was looking at. And I'll zoom in again here uh so it's a little bit easier for you guys to see. There we go. So obviously we had the the first leg down here and you could call this the first leg or almost the second leg because we had so much chop back in this area that that was almost kind of a correction in disguise here with deep sea gap down all of that. Uh so whatever you want to call it, this could be the first leg or second leg. Uh but regardless, we had an initial move lower break below the 21 EMA. This just like Roy and West, I'm interpreting the same way. This was when to get out of the markets. You're probably getting stopped out on race stops as as stuff is breaking 20 the 21 EMA. I remember I was getting stopped out of Palanteer, Reddit, uh those leaders of that previous uptrend and we have a significant downtrend breaking below the 200 SMA. Volatilities super high gap ups, gap downs, but overall we're moving lower. Then we had this consolidation, this range form. This becomes the the local key low to measure if we're uh you know having a a valid rally or not. And we did try to move out of here but we were rejected as we tried to break above the 21 EMA then 200 SMA and we're rejected down and again formed a lower high here and then the tariff gap news uh hit here and we started that downtrend.
Uh but this is kind of how I interpret price action and it's kind of a part of a playbook that I view all downtrends and transitions from a downtrend to a correction and we'll talk about the the base trading playbook later on the presentation. But here we have extension to the downside that then closes up. That's the first positive sign you're looking for. This becomes the key low that you're considering. Then we have an inside day that holds above this low. Again, this low is key. Then we get reconfirmation up. It is a powerful day. And important enough, you know, this inside day closed pretty close to lows, but instead of falling to the through to the downside, which is where the momentum was, we rallied incredibly strongly. So that was a a sign for the bulls here. Definitely a positive sign that a rally could really be taking hold here. Then we just consolidated within this massive bar below the 21 EMA. Often the first and even second rally into the 21 EMA, the declining 21 EMA will fail and it will set up the next higher low, which is exactly what happened. We had some tightening action, then a gap lower, another gap lower, but then we started following through to the upside and testing that 21 21 EMA one more time. And this time we were able to close above it. Really get going uh and had reconfirmation up. We had this day where again we hold the 21 EMA and have a strong close after the gap down. Another positive sign. Then we rally test the 200 SMA pull back tighten from another higher low. We have a strong close here after the the Fed news here. We follow through to the upside carrying on that momentum consolidate near the 200 SMA and then we get a gap up and continuation up.
So you can kind of see how you can look at it both from a fundamental news-driven lens but also a technical lens. And regardless of how what the dominant news factor is, the technical lens will always look pretty similar at these market bottoms if you stud study enough of them. There's always extension down that gets bought up. No further pro price progress to the downside. Higher lows form. Reclaims and moving averages. There's less gaps. There's more tightness in price action. And that playbook just kind of plays out again and again.
Uh and then this is uh uh a chart that I made actually uh for that market cycles presentation uh uh for for the handbook. And it was kind of interesting. We did that webinar uh 2 days after the market cycle turned on and and a lot of the stuff that we talked about. We talked about a stress test and that happened the very next day. And lucky enough we we heard from a bunch of viewers of that um that webinar that that that actually helped them immensely. They helped them stick with the positions they had during that stress test and actually buy more uh on that weakness. Uh but the market cycle began here and then what this chart is showing is basically key price and volume action moves from leadership quality stocks um that goes along with this trend and market leaders will always kind of form up and maybe make a higher a higher low as the market forms one more uh lower low.
Um, and just in general, as the market forms up, you're going to see leaders kind of do the same thing, but be a little bit stronger and lead the market higher. They'll reclaim the moving averages first. They won't progress um as much to the downside during that last leg lower. And basically here again with each day, I've noted the key price and volume moves from stocks like PLTR broke above it 21 EMA here. It had another 21 EMA. It actually had a 21 EMA pullback here on April 21 that it rec reconfirmed to the upside. Uh MCR had a gap and go on this day. Netflix had a gap and go on this day. That was a stock that was standing out. Uh TM had a range breakout on this day. Numerous gap ups. Uh so you can kind of see how the the market leaders are acting along with what the market's doing here. You had GEV range breakout. Uh Tesla breakout here. Octa 50s SMA pop. Uh so you can kind of look and see and there's a great exercise. I highly recommend it. Basically look at a market index along with key leaders and note when their their setups really developed and really matured and where you could have entered after the market uh kind of really got underway and reclaimed that 21 EMA.
And then this is um actually a screenshot. It's basically the information from two tweets that I made on April 2022 or sorry, April 22 uh which is the day of that first follow-through day. And these are basically what Hood and Palanteer looked like on that day. You had a hood popping through the 21 EMA uh forming a clear higher low here. You had a negative close on this day. And let me let me zoom in so you can actually see. Hopefully that's better. Uh you had a negative close on this day and then on that 20 uh April 22 day. You had a positive bar here breaking through the 21 EMA. Nice close. You can see how this chart looks just so much stronger than the QQQ on that same day. And from here it was off to the races and acting tremendously well. And then here is Palanteer on that same day. Look at how it rallied off the highs. Its base, this entire base is above the 200 SMA. You can see it peaking here while the market was well below it. And that's one key sign of relative strength that you want to look out for. But again, this is when the market bottomed. It had a strong undercut and rally, reconfirmed to the upside, popped to the 21 EMA, and it was holding above that as the market was still, you know, trying to push through. And on April 22, it's forming this nice range and a nice inside day here that actually uh pushed higher uh very shortly after this. And obviously, you know, Palance here up about 40% from this point. It did. We have an earnings gap down, but then made new highs today here as we're giving this presentation. So, this is kind of what you want to see leaders look like as the market is really putting in that that that first higher low is there at more advanced than the market and basically setting up that first uh you know EMA cross back into the 21 EMA and then reconfirming off of that.
All right, so here are some key points that I want to kind of distill about interpreting the market based on the fundamental factor, what the leadership is doing, all of this. So, hopefully this helps uh sum it up here. Um, price action is the ultimate decider. It interprets news and judges it. Your opinions are irrelevant. Leave your ego and politics at the door. Whatever you think about Trump and his policies and tariffs and how he's
Interpreting things, it doesn't matter when, with regards to trading. Your job is to just interpret the price action, interpret the price action, the market indexes, leaders, and do your best to participate, uh, on the right side here. And then here, uh, know what the key fundamental driver is, uh, that the market cares about. Note how price reacts in relation to related news catalysts. So you know, CPI inflation that was huge for quite some time, uh, during during the bare market, and then finally we saw some, uh, instances where the market brushed everything off and responded positively to negative news catalysts to what the Fed was saying. Uh, so that's always what you want to be looking out for: uh, when you know what the dominant factor is, whether it's trade wars, whether it's, uh, general war, whether it's a pandemic, uh, whether it's CPI inflation, key news events, jobs reports—note when price reacts much differently than you'd expect it to and starts ignoring negative news events related to that dominant factor.
And then this is really key and related to that: the market looks ahead. The leaders and indexes will bottom and start trends as a light is first seen at the end of the tunnel. Not when we're really approaching it and it's really clear. Just when the first few signs of positive, uh, news and and developments, that's when things will start shaping up, and that's when we want to stay start getting involved, uh, to participate at that lower risk zone when breath is expanding, everything's spreading, we're getting those zag, uh, breath thrusts, all of that. That's when we want to start putting on positions or or be adding exposure as we go and get positive confirmation and trade confirmation.
Uh, then to really sum it up, this is something that Ross, who is a co-founder of Trader Line, uh, former portfolio manager for O'Neal, uh, he really sums everything up with: watch the leaders. You know, if you were paying attention and and watching for relative strength throughout the correction, you notice Palantir pretty early, CrowdStrike pretty early, and as they, you know, bottomed and started showing respect for the 21 EMA and, you know, forming higher lows and reclaiming moving averages, that was the sign that, hey, the market's going to shape up here. We're shaking off what the news is. And you can gain so much information from just watching the leaders, both to the upside as we're beginning uptrends, also to the downside as we're breaking down. And we'll we'll actually show, uh, a slide of that in just a minute.
And then the last point is, and we'll talk about this in the second half of the presentation: You need to establish a market cycle system and rules that define how you analyze the market and you know, position early in an uptrend to, you know, get get close to, uh, you know, getting positioned early in that uptrend to participate and then also to when things are breaking down, how do you protect yourself, lock in profits—all that. You need rules to define that market cycle system so you can, uh, do that repeatedly, uh, you know, hopefully just like Roy has over 35 plus years in the market, uh, you know, these these rules are going to apply over and over again. We're going to see the same show where market leaders break out at the beginning of an uptrend and then eventually we top and things roll over and all that. And you need to come up with rules that encapsulate the key moments there and tell you how to how to act, how to sell into strength or how to sell into weakness, how to buy, um, you know, early in an uptrend. All of that should be kind of decided based on those market cycle rules.
And this is kind of a good encapsulating point here. Here at the top we have Reddit, um, which was one of the key leaders during that that strong uptrend into the end of last year and even into the beginning of this year. Uh, we've got Palantir here as well, another one of the key leaders here, and then we have the QQQ. So here was the chop phase here. Uh, the Fed changes tune on this day. Uh, but you know, Palantir here and Reddit still had a little bit of juice in it. Uh, they were probably the strongest stocks. Nvidia and MSTR, which were the best leaders, uh, before that had already kind of topped and done their last, uh, exhaustive runs, and these were kind of the two key names left standing. And what did they do before the market broke down below their 21 EMA? Well, we had a breakdown below the 21 EMA here on Reddit and starting to live below it, and Palantir a few days before the market really broke down. It was short-term extended, and then in one day I think it it dropped eight, maybe 10%, um, or I'm not quite sure, but it broke several lows at once and really changed the short-term trend of that, and these are subtle signs that you want to be watching for when the key leaders start breaking below moving averages or breaking a lot of lows at once and just changing character in general—that might be a tell to say, hey, become a little bit more defensive because a correction could be coming, could be coming soon. We never know how bad it's going to be, but it can give you a heads up and just let you be in a more defensive mindset, uh, and protect your capital that much more, um, you know, when we begin a new downtrend.
And then Palantir as well, you can see how it shapes up versus the QQQ. You can see how this low relative to where the QQQ's low is much tighter and closer to its previous low. Again, just showing relative strength, and this happened, I don't have it on this chart, but above the 200 SMA, and this broke well below its 200 SMA. And just obviously, this is a a little bit of an older slide, uh, but you know, this was still below this 200 SMA as the Palantier was already above its 21 EMA and 50 SMA and rocking and rolling. So that's a good slide to kind of, you know, encapsulate why it's important to watch the leaders both to the downside as early sell signals and warning signs as well as to the upside, uh, when a new uptrend is beginning.
All right. Uh, so early uptrend, this is just a quick review of, you know, what to think about early in an uptrend as we're forming higher lows, reclaiming moving averages, and leadership shapes up. Uh, the goal during this period is to gain exposure to the top liquid ideas to test the uptrend and then listen to trade feedback and manage your open risk and make sure that if things roll over, you know, you're not taking too much of a hit. Uh, but if things work, you're you're increasing your exposure as Wes and Roy showed how they were, uh, to participate in that uptrend and and you know, move your portfolio forward. Uh, early in the cycle, there'll be a lot of noise, uncertainty. This is why we need a system to define our actions and then just simply let the market show us what to do. One of my favorite quotes from, uh, Nicholas Darvis is, uh, basically he he puts on a trade and then he says, you know, and then I let the market decide what happened next. You know, either you get stopped out or you don't. And that's valuable feedback that can then tell you to be more aggressive or defensive. Uh, gap ups, breakouts will be doubted early in an uptrend. Trust your system and your risk management process. Uh, gap ups are almost more powerful during new uptrends because you know nobody trusts them versus later an uptrend. You know, the third gap up, um, you know, is more likely to be sold into and be an exhaustive gap versus one that you'd want to really position and be able to ride for that entire kind of earnings earning cycle, the trend between, uh, earnings earnings reports.
This is just a quick note on some things to be doing during a correction to, um, to really be ready and identify again the Palantirs, CrowdStrikes, MSTRs early on so you know which ones to position. Basically, each day you want to kind of build a consistent, um, relative strength list. Just, you know, make a quick list. Go through your your screens and jot down any names that are standing out in terms of holding above above moving averages, reclaiming moving averages first. Um, on a big red day in the market, you know, when the market's gapping down on bad tariff news, which stocks are staying green or staying positive? Note those type of stocks and look for themes among them among them.
And here are some quick things to look out for: uh, look for stocks and themes that are, uh, holding well when the market is down big, holding above moving averages, forming higher lows as the market forms lower ones, consolidating sideways as the market really trends down or makes another leg down. Uh, they are bouncing the strongest after the market puts in a key local low. Uh, reclaiming key levels first, breaking out first through levels, highs, all-time highs, and also entering RS phases. And RS phases is just when the relative strength line is above its 21 EMA. Um, so we'll we'll show that in a chart in just a minute on some of these leaders. But these are some things to look out for to identify what the leaders are going to be. And if you were looking for these things, you identified, uh, you know, Palantir, Hood, uh, Uber, uh, these are the key names that have done tremendously well early in this uptrend. We'll see how things go from here. But this how you spot them early on so you can buy them on that first, um, higher low or first pullback to the 21 EMA or the first breakout, um, you know, pop above the 21 EMA or the first range pivot breakout. This is how you spot them early so you're ready to act when that setup occurs.
Uh, here is a quote that just kind of shared my, uh, RS list and the names I was watching during this period in the market where again we've put in a bottom, we've had this tremendous bar, and now we're consolidating. We saw see a lot of names that have done really well: Lore, Hood, CRWV, Cyber, you know, that that theme has been doing well. CrowdStrike, Palantir, GEV, RBRK. So, uh, you know, Titan, GRPN. How how did I find these names magically early on? Uh, well, I was just trying to kind of pay attention every every day and see what was holding up the best, what was holding above moving averages, what was bouncing the strongest over the past 5 days and and 5 days because that's when the local low happened. And I kind of run a screen in DFW. Uh, we've got, uh, data points that look for performance over the past x days. And right after a market correction, there's a golden nugget for you guys that write this down. Um, you know, if we're 5 days past the local low, run a screen or sort your screen by percent change, uh, from, you know, over the past 5 days. And that will show you the stocks that are bouncing the strongest since that market low. And some of them are going to be destroyed. They're well below moving averages. You want to kind of ignore those or just keep an eye on them. But the ones that are holding up well, forming more mature bases, uh, reclaiming moving averages, those are the ones you want to have on your radar. And a lot of these fit that bill. And actually, my focus list from these were these three: Palantier, Crowd, and Hood. Um, so that just kind of to show you the the value in doing an RS list every single day, doing your homework because it's going to set you ahead, and when the rally, if it does materialize into something real, which this one has so far, you'll be well ahead of the curve, be hopefully positioned in the leaders, you know, three, four, even five of the leaders and benefit from that natural breath expansion, uh, that we see early in uptrend. So, that's a quick thing on RS lists, uh, and kind of showing kind of m what mine was during this period in the market.
And then, um, a big reminder that I want to I want to, uh, emphasize here is, you know, we're still so new in this. So, uh, you know, this like like Wes pointed out, we're maybe a week, two weeks, a week and two weeks and a half, uh, from when we just reclaimed the the 21 EMA. We just reclaimed the 200 SMA. Uh, and, you know, there's going to be time, even if you're not positioned here. The leaders that made their moves are going to set up the next buy points. They're going to pull back into the moving averages, pull back to pivots, and naturally, in the first few weeks, you know, four weeks or so of a rally, there's breakouts. And this is a similar graphic that I made, uh, back last year, uh, analyzing that correction, um, you know, the the names and how they broke out, uh, from there. And you can see that even, um, a bunch of weeks later after this market bottom—sorry, I'm trying to zoom in a lot here—Uh, there were names that were breaking out, you know, GPS, ARM broke out here, path, GTLB, affirm. So again, the the point here is that even several weeks after the market reclaims the 21 EMA and reclaims the 200 SMA, there's going to be opportunities. So if you feel like you've missed this uptrend where maybe in the first or, you know, second early second inning of this uptrend if this really materializes into something great. So don't feel pressured. Find those low-risk buy points and, uh, just be patient and and you know, the time will come to be aggressive and, uh, you know, right now we're kind of almost in this phase where we're potentially short-term extended and maybe the rally is still just getting getting started. But here what do we have here? We've got a week-long consolidation that set up new buy points, new pivots, and that that'd be kind of what to look for if you're not if you don't have too much exposure already here.
All right, so getting into, uh, this a little bit and like how to trade a PLTR or Hood if you spot it early. You know, trading a BL base playbook, these are just kind of the things that I look for: Uh, watch for an extension down or gradually gradual bottoming/tightness action at the lows of bases. Look for signs of power off the lows, you know, strong bounces off the lows. Look for look for the formation of the first higher low. Uh, as the base matures for entries, look for tight areas, moving average reclaims, constructive pullbacks or other entry tactics as the stock is generally moving up the right hand side of its base. This could be again a pop through the 21 EMA, a pullback into that 21 EMA as it forms a higher low and then a reconfirmation up through a an early buy point, a cheat area, something similar to that. Uh, but what's important is, you know, these entries should allow risk to be managed. I like to do under, you know, four, even under three percent risk using oops, reversals and other entry tactics, but you want to keep risk very tight here. So, if the market rolls over, you're protected and you're not losing too much of your portfolio. Uh, and then I like to look for full positions before the standard base breakout through the pivot. You know, Palantir just had it today, but there were opportunities where you could already be at a 30 40% cushion if you bought early in the base while managing risk very tight. Uh, but yeah, as I was saying, you know, when a stock approaches the actual base pivot, often it's in the eyes of everybody in the market, and I'm always trying to, you know, uh, establish at least a starter position, beginner position before then. So, I've got a cushion going into that volatility that often happens near that base pivot.
All right, and this is just an example with, uh, this is a great example of app back in the fall. We had that extension down, power off lows, the higher low here, reclaiming the 21 EMA, and then it sets up a nice tight range entry here. So, even if it broke out here, you think it missed it, it experienced that volatility, volatility near that base pivot, pulled back into that 21 EMA, and set up a really nice pivot here. And we all know what happened. It doubled and or even more from this point. Uh, so be patient. Look for the lower spots. You know, everybody who missed this day right here and weren't positioned feels like they missed the stock. But you just have to be patient and and wait for the next buy point because often, you know, the the best leaders if they're going to double and triple or even more so, there's going to be plenty of other low-risk opportunities, pullbacks to moving averages, fresh breakouts where you can jump on to that trend.
All right. And I'll go these through these pretty quickly, but, um, I'll probably send the slides to to Roy or you can email me at richerttraelline.com and I'll send you the slides. But this is just kind of, uh, doing a few case studies of some of the different key leaders. This is Palantier again, based above the 200 SMA, big oops reversal here, which is basically when we open well below, uh, this low right here, the prior day's low and rally back through it. This is a potential entry point, but often, you know, with extreme volatility, it's just a good sign of strength. Um, and then we rally below the above the moving averages. We pull back to the 21 EMA. Uh, you could have built a position here and, uh, range breakout and then you're on and got a nice cushion going into the base pivot. You could have held through earnings at least part of your position and you know, even added back anything you sold before earnings, you know, at this bar or this bar right here on the fresh breakout. So this is just a quick annotation to Palantir. And again, if you want to look at this more on your open time, uh, feel free to do so.
Uh, here's Hood. Same type of playbook again. Reversal, extension off lows, reclaiming the moving average, tiny up the moving average. This is kind of your first potential opportunity, rallies again, sets another opportunity against the 21 EMA below this pivot. And then we got reconfirmation. Then we get this recent extension. And you know, I saw a question from Arnold, I think, you know, talking about, you know, the future. Where would future spots be? Well, if you look to the left, you can see potential resistance up up here. We're approaching that or short-term extended into that level. So, the next opportunity might be a handle that sets in here against the increasing 21 EMA. That would be a spot to look at both in the stock in Hood as well as in the market at large. You know, right now in this in at this point, we're a little bit short-term extended. We've come a long way over the past 5 days, but that doesn't mean we have to pause. Again, the market's going to do what the market's going to do. And early in an uptrend, we can we can seem overbought for a lot longer than, you know, we call those lockout rallies, right? So, you might have to be creative and find an oops reversal or a spot against the 10 EMA to position. Uh, but that's why it's important to do your homework early, have the RSS early so you can be trying to pick up Hood at this spot or against the 21 EMA or on the reconfirmation or the gap and go. So, these earlier buy points, that's what you want to be focused on. But if you're not already in, we're still below the base pivot breakout. So technically, we'll still we're still early. So on if it pauses, sets back up, that would be a spot to to look for.
Then we've got HIMS. This is a much more of a faster mover. I wouldn't necessarily call this a a true market leader quality. It's a little bit more of a momentum type name versus a a market leader, but it's in play. It's got a theme, which is the, uh, the weight loss diabetes, uh, movement. It had the catalyst partnership with, um, with NVO to offer their drug through the platform. It had a gap up, a really tight day, and this is a subtle thing that I look for: really tight setup days because they can set up a good pivot through the highs, and then it broke through and it's been on fire since on the earnings where it reported earnings. This was the first opportunity buying here, and then the second opportunity was on the oops reversal after it gapped down on earnings and immediately rallied through. Um, and I did a write-up for Trade Lab on actually both this setup and this setup. Um, if people want a little bit more information, um, and then right now, again, it's such a powerful trend, but short-term extended, it's kind of in no
Man's land, where, you know, for our style, the number one thing is, can we manage risk? Is this a tight and logical entry from a setup that we expect can see an immediate move? And right now, it's already making an immediate move. So you have to wait for that next contraction, that next pullback, the next key resistance line that that might break through. So that's him.
Uh, another really powerful opportunity, uh, during this uptrend as it stands. Uh, here's MSTR. I know you guys have been trading IBIT, uh, Roy and West. This is the the the stock name to trade when it comes to crypto-related. It had that same thing reversal down, but I think this is a really key thing to point out in terms of looking for relative strength. We've got a move lower here, but we don't actually break these previous lows. And as dramatic as this pullback was, we weren't able to really break much below the 200 SMA, and we immediately rallied back up and again held above these highs right here. So, a sign of relative strength that really claims the 21 EMA well below before the market forms a tight area here, breaks out, sets up really nice and tight on top of this pivot and has just been really trending and re-breaking out, um, above the 10 MA ever since.
Um, so, you know, not much to do here if you own it. Uh, just trending above the 10 EMA, trim and trail and watch for a defined break below those moving averages. And you know, IBIT Bitcoin might be just getting started again, just moving up the right-hand side of a base. So, we'll see if this can have a really nice trend like we saw in the latter half of last year.
Here's Tesla. Um, again, uh, this is another sign of relative strength, even though it was pulling back. And this is in more of a significant decline than the other names we we talked about. Most of these were forming their bases around the 200 SMA. But Tesla is the type of name where when it's in play, it can make a dramatic move. We saw that in 2020. We saw that a little bit, uh, to the end of last year. Uh, and we have had a significant decline. But again, this last pullback in the market, we weren't really able to make any more downward progress. There's some accumulation going on by the largest funds where they're saying, all right, we're we're comfortable accumulating Tesla within these prices, and they're they're absorbing any supply that's coming to market, and after such a significant decline, we're looking for the type of, you know, bottoming type action, bottoming base, higher lows to form. We get a first higher low here, we push higher into the resistance level, and really this was actionable, and the best buy point was last week. Uh, you can see how we pulled back into the 21 EMA, these two very tight days, and uh, I talked about this in real time, uh, in the trade lab. Again, this isn't hindsight. You've got a pivot through these highs, breaks higher. You've got another buy point popping through the 200 SMA, and now it's kind of um out of the out of the woods here. We're we're we're a little bit short-term extended, strong reconfirmation today, just breaking out of this bottoming base. And basically, you'd be watching for the next higher low against the rising moving averages if you're not already in, uh, this name. But again, this is so early because this is just moving off the bottom here. If it's actually going to make a meaningful trend, it's it's still well below all-time highs. So, there's time with Tesla if if it's going to set up and keep moving.
Here's Uber, uh, just uh the day before and and and today it made really nice moves. Again, we've got that reversal extension, oops, reversal off lows, reclaim of the 21 EMA. These are just kind of things to mentally check off, higher lows, retesting the moving average from, uh, from the top side and holding. That's the key thing to look for, tight ranges, and then it moves higher and then forms a nice tight range on top of the base pivot that really was set up, uh, from the base that's about 15 months long. So from big bases come big moves, and this is exactly what we're looking for, and we formed a nice tight range here. Uh, topside pivot through these two bars here. Pulled in and then rallied and really strong close on Friday. That was the time to to enter right here or even against the base pivot, managing risk a little bit lower, and then you've got a nice follow through. This is what you want to see on a base breakout, just keeps going, and we see successive buying the next day, even the day after that, getting you out at a profit right away. So that's another good case study here with Uber.
Um, so again, here's the trading base playbook. These are things to look for as the market is bottoming, as stocks are bottoming. First, look for an extension down or gradual bottoming tightness action. Look for signs of power off the lows, relative strength, holding above the moving averages, strong bounces. Then look for the formation of the first higher low. And then as the base matures, look for entries, uh, from tight areas, moving average reclaims, construct a pullbacks into those moving averages or other entry tactics as the stock is generally moving up. And we want those entries to be tight and logical, allowing you to manage risk under 4%. And then ideally look to have a full position before the standard base breakout or maybe accumulate two/thirds and add that last third or fourth on the actual base breakout, uh, when it confirms, uh, that it's actually starting to move. And then simply manage the position versus uptrending moving averages. Keep it simple. That's what we want want to do until it actually starts breaking down. Try to keep keep that trend going and participate. [Music]