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What's up everyone? All right, in
today's episode, I'm going to break down
the leading gainers in the market this
morning. I'm going to walk you through
the setups that I was looking at, and
I'm going to give you my outlook for the
rest of the day. Before I do that, let's
take a look back at yesterday. Yesterday
was a red day recap for me, max loss.
Friday was also a red day recap. So, in
those two days, I was down 10,000
rounding up on Friday. I was down 30,000
yesterday. So, I'm in a $40,000 draw
down here in 2 days, which seems like a
big number. It sounds like a big number.
You could buy a lot of used Subarus with
that kind of money. I'm aware of it. But
at the same time, it's important to
maintain perspective. And I've had far
deeper drawdowns this year, much bigger
losses. And I I kind of think about it
like this. A drawdown is is a symptom of
something happening. There's one of two
scenarios. One is the market is shifted
and so you're suffering losses because
the strategy which is your go-to
strategy is not performing as well in
the current market. That's external. So
there's an external variable which is
the condition of the overall market and
it is shifted and now your go-to
strategy is not performing as well as it
used to. That's the first scenario. The
second scenario is an internal variable
which is that the market is fine but I'm
no longer centered. I'm emotional. I'm
giving into FOMO. I'm buying the top of
moves. I'm selling on the bottom of
candle wicks and I'm just not in the
zone. And the market could be extremely
strong, but I'm screwing up and I'm
losing money. Unfortunately, sometimes
both can happen at the same time. And I
would say that's what's happened in this
latest draw down for me. Yes, the market
has cooled off. Friday was cold. I came
in on Monday. Monday was cold. But I
also became emotionally compromised as I
began to lose and I started getting
stubborn and I started trading with
bigger share size as I went deeper into
the red. And so, as you can imagine, if
you're starting to lose and you double
down, then you're going to start to lose
more and more and more. What you should
be doing when you start to lose instead
is you have that first loss and it's
like, "Hello, wakeup call. This is a
signal. The market's that something's
wrong." either the internal variable or
the external. So reduce size. Now with
smaller size, you lose a little bit
less. The warning sign gets even bigger
because now you have a second loss in a
row. And maybe at that point, you would
take another trade and you say, "All
right, you know, three strikes, I'm out
of here. I'm done. I'm not going to
overstay my welcome." And I could have
walked away with probably a third of the
amount of loss I suffered yesterday if
I'd had the presence of mind to do that.
But variable number one, the market was
not on our side yesterday. Variable
number two, my emotions, me was also not
on my side because in this moment here I
immediately became frustrated, right?
Frustrated, angry. And so rather than
reduce size, I increase size. So loss
number two is bigger than loss number
one. Loss number three was bigger than
loss number two and number one. And so
that's how I got myself into this minus
$30,000 drawd down from yesterday. and
now minus uh plus the the 10 uh from
Friday. So now I'm at minus $40,000.
Disappointing. There's no question about
it. And so when I sat down this morning,
I said to myself, look, clearly there's
an external variable, which is the
market. The market has cooled off. The
writing was on the wall. I could see
that through August that it was cooling
off. I pushed too hard in September. It
didn't pay off. And so, you know, there
I there's no excuse, but better late
than never. Take your foot off the gas
now. So, I said, "The market's cooled
off. That means I have to focus more on
trading dips off of support, entries
closer to support, and being more
cautious buying at the breakouts during
a hot market. I obviously buy at
breakouts and do very well, but that is
really a hot market strategy, whereas
trading dips off support is more of a
cold market strategy. You could trade
dips during a hot market, too. I mean,
there's no reason you can't. And in
fact, I do, but during a hot during a
colder market, you really don't want to
trade the breakouts as much because
you'll see too many false breakouts
where you get that quick pop up. And
I'll show you what it looks like. So,
this is the false breakout. You get one
candle up, you get another candle.
Typically what you end up seeing is that
as the price is going higher the volume
is declining. So the trend is exhausting
and then you get a pullback here and
it's a sharp pullback. It's typically on
higher volume. Shorts are eager to jump
in. You get another drop here also on
high volume and then you think I'm going
to get in here for the first one minute
candle to make a new high. That's what I
want to see. You jump in. The candle
pops up as traders, you know, like you
are jumping in and then you get this
sweep of selling and the price drops
down and you end up having a dramatic
false breakout on even higher volume.
This is very typical of cold markets.
And the clue, the hint that this might
happen is in the volume profile right
here of declining volume on the up ramp
and then high volume on the selling. And
certainly if you see the presence of the
the candles getting smaller and smaller,
the trend's getting exhausted and
sometimes you'll see a big topping tail
like that which only shows us that the
sellers pushed it down that much faster.
So in a colder market, you got to be a
little bit more careful trying to buy
those breakouts and instead let the
stock fail. Let it let it sell off and
then if it starts to base out down here,
then this starts to become a level of
support for a potential curl back up.
But I'll tell you, it's hard to trust
the curl back up when you've got a
topping tail here and a topping tail
here. So the entry is down here once
support is established. This is support.
So I'm in with a 105 cent stop. My
profit target realistically is take
profit up here for a double top or take
profit up here for the double top at
this level. And I'm not expecting that I
should add here for a big squeeze
through a new high a day because that's
hot market stuff and we're not in a hot
market right now. All right. So, here's
the P&L for today, the big reveal. Zero.
I made zero, which means I'm still in
the draw down from yesterday and Friday.
I made no progress on recovering it, but
I also didn't make it worse. If we look
at the scans today, our leading gap is
up 94% right now. BKYI,
I didn't trade this. It is an inverted
head and shoulders pattern. I did
mention this uh was taking place here.
You've got the descending resistance
line which I connected at this line and
this line here. And so this had
resistance then becomes support then
bases off this level and goes from 3 up
to 335. You're talking about 30 cents a
share. Now here's the reality. If you
get a 30 c move, you never capture the
entire move. I mean it's just not
realistic. Even if you got down here off
of support, you know, around 290, would
you magically sell the whole thing at
the top of that candle? No, you never
do. You either hold a little too long
and you sell as it comes back down or
you sell a little too soon as you sell
into strength. I'd probably be selling
too soon in this kind of market. So on a
30 c move, maybe with a little slippage
on the entry and a little slippage on
the exit, you capture about half of it,
15 cents a share. That's probably best
case scenario. And your risk on the
trade was probably also 10 15 cents.
Probably wouldn't have taken the full
15cent loss, but you never know. So
unfortunately, it's not a setup that I
would have had a lot of conviction in
because of the topping tails, because of
the descending resistance. Yes, it's
kind of support, but it's also going
above and below it here. And so I just
didn't feel like it was really worth it.
I also know that generally these lower
price stocks can be pretty risky for me
and I can end up making mistakes on
them. So up here you've got your
previous high a day that's at 360. That
is that little push right there. And
what you'd be looking for on this type
of setup is for it to hold that level.
But again, in this kind of market, what
we would worry about is the double top
rejecting.
So you've got BKYI now up 100%. You've
got SSTI.
This one is a buyout. The company has
been bought out at $8 a share. It's
trading a little bit above eight. Uh
there was uh if you go through the
headline, you could see the terms of the
buyout. Uh, but typically the way this
works is you get the buyout, you get an
immediate spike here on 600,000 shares
of volume, and if you were really quick,
you might have been able to jump in
that, but you'd have to be very quick.
And now it's going to trade more or less
sideways at $8 a share because that's
the value. SLND has 121 million shares
of volume today. The price is 89 for me.
It's too cheap. SNG, $5 a share, 24
million share float. It's a little
higher. Canadian company. Haven't done
particularly well in Canadian stocks.
MSGY, Hong Kong stock. This is the one
that popped up on Friday. Then yesterday
it sells off big time from eight down to
three, curls back up a little bit. This
is just a bounce off the low. I don't
have any interest in that. Kind of
reminds me of RTO RET, which put in that
incredible move. Now it's at 13 cents a
share, but just the other day or uh the
a week ago ended up going from.7 up to a
high of $20 in two days. That's
unbelievable. It's a huge move. And this
is something that I think is worth
noting. So a lot of traders in this
market right now are talking about
fundamentals. They're saying these
companies have a shelf registration.
These companies have warrants. They're
going to do they're they're going to
dilute the stock. They're going to sell
shares on the market to raise money. the
stock is going to go down. Here's the
reality of most small cap companies.
Most small cap companies have a shelf
registration. Most small cap companies
are at risk of selling shares on the
open market. They're lowerpric stocks.
Many of them have done a series of
reverse splits. They've done secondary
offerings in the past. This is not
unusual. We know their fundamentals
aren't great. If the fundamentals were
better, they wouldn't be so cheap. This
is the reality. And yet what we also
know is that the price can become very
disconnected from the fundamental value.
So if you're focusing purely on
fundamental analysis, what would you
have done when GameStop squeezed from 5
to 10 to 15 to $20 a share? You would
have shorted it because the fundamentals
didn't support it being at 20. And what
about when it went to 25 and 30 and
3540, 45 and 50? You would have added
more because the fundamentals didn't
support at 25. And they certainly don't
support at 50 and then it goes to 100
and then 150 200 250 300 350 400 450
$500 a share. The Volkswagen short
squeeze was even bigger by the way than
GameStop. The Volkswagen short squeeze
cost hedge funds over $30 billion in
losses. The price went up to like $1,200
a share. It was unbelievable. Now, the
price ended up coming back down.
GameStop came back down, but that
doesn't mean there wasn't for a period
of time a huge disconnect between
fundamental value and the price of the
stock. And so, what we know about small
caps specifically and human behavior,
this is just human nature that in the
all the history of the markets, you go
back to all the markets, there's always
been bubbles. You've got the Dutch tulip
bubble. I mean, this is not a new
phenomenon that the prices can be very
disconnected from fundamental value. And
so, these present opportunities if
you're trading to the long side to
capitalize on this volatility. And if
you're going to be stubborn and just
trade the opposite or just, you know, be
sort of eternally pessimistic and say
the fundamentals don't support the
price, then you're going to be someone
like Michael Bur who is always calling
the top. everything is a short. And
meanwhile, since the housing market
crash, he of course made a lot of money
on the on the bubble. If he had put all
that money into the S&P 500 and just let
it ride, he'd have far more than he has
right now by trying to just call tops,
call tops, call tops. So, I'm not a
Yeah, look, I mean, if you're a
contrarian, it's the way you're kind of
wired. That's not the way I'm wired. I
personally look for momentum. I look for
opportunity. I look to ride that
momentum. uh in the same direction as
the trend because I've always found it
easier than trying to fight the trend.
Fighting the trend is so frustrating. I
think sometimes people who fight the
trend, they just they love that feeling
of finally being right and everyone else
being wrong. And that's something you
you got to kind of look deep into why
that feels. I mean, look, I I don't
know, but the the feeling of everyone
else was wrong, but I'm right is like a
big confidence booster. And I think that
contrarian personality of someone who's
just so hardwired to disagree, uh, you
know, that's a tough that's a tough
personality trait if I'm going to be
honest, in my opinion. And being around
people that are like that, I don't find
it to be particularly enjoyable. So, in
this market right now, we are seeing a
lot of those contrarians in the in the
small cap market. Their voices are
louder. They're saying, "All of these
stocks are a short. All of these stocks
are companies that are going to do
secondary offerings." And you're right,
and so was RTO. So was RITO. And in
spite of that, even in spite of its
fundamentals not being that great, it
went from.7 cents a share to 20 bucks.
What about Jag X? Jag X is the same. Jag
X went from a low of $5 a share to over
$60 a share.
So, if you really are so focused on the
fundamental analysis, you probably
shouldn't trade small caps because small
caps can be very irrational. If you want
to be a fundamental investor, if you
want to buy things based on value or
short things based on real value, you
probably need to be focusing on much
larger companies. you know, your Tesla
and Nvidia and Netflix and stuff like
that because these small caps, I mean,
it goes the other way, too. We can have
a small cap that has great news and the
price doesn't go up and it doesn't make
sense. I don't get it. But you can't be
stubborn. You got to just accept it. So,
I focus on trading the technicals. And
from a technical perspective this
morning, excuse me, there really wasn't
anything that looked that great. So, we
had BKYI, you know, like I said, wasn't
very confident in that. None of these
leading gainers gave me any confidence.
We had DCAI. This one popped up earlier.
Uh uh DC DCIA maybe. What is What is the
ticker? Um oh, now I'm forgetting. Well,
DIC, that was it. So, this one, look at
this. This pops up, then completely
reverses back down. Now, it's rallying
back up a little bit. These are scary
moves. This is a reminder not to jump in
the first thing that's popping up cuz
this can really get us into a pickle.
So, I'm trying to be patient right now.
I'm just waiting for things that really
look good. And you know, these are
cycles in the market. It's cold right
now. We're waiting for the next theme.
But once we get it, once we start to get
in the zone, then I'll be able to size
up and, you know, be back at it. But for
right now, I'm kind of putting myself on
the bench. I'm on the sidelines and I'm
waiting for the market to improve
because if I keep trading right now, I
know I'm subject to a higher likelihood
of emotional hijacked and that internal
variable of getting frustrated and that
could result in further losses. So I
have to size down. So if I trade with
small size and I lose, the loss is
smaller. So it's less emotional. And if
I can, you know, recoup some losses with
small size, that's great. Uh but on the
other hand, if we're not seeing good
action, it really is better for me to
sit on the sidelines because the
downside of trading isn't just the money
lost. It's the risk of getting
emotionally hijacked again and spiraling
and going further and further into the
red. You guys have seen when we have
solid action, I have no problem having
big green days. We just don't have that
action right now. So, I've got to be
more patient. I've never been good or as
good as I'd wish at taking my foot off
the gas when it slows down. That's
something that I'm still trying to work
on being better at as a trader. But in
the meantime, my form of taking my foot
off the gas right now is putting myself
on the bench. So, right now, by the way,
John is streaming in the small cap room,
walking people through the price action
on MSGY, walking people through the
price action on BKYI. And so just
because I'm done for the day doesn't
mean the chat room's closed by any
means. You can be in the room right now.
You can listen to real live market
commentary. You can be chatting with
other members in the community and
continuing of course as always to go
through the classes and the curriculum.
So I encourage you guys to check out the
twoe trial. Link is pinned at the top of
the comments and in the description. So
you can use this software, you can be
part of the community and see what it's
like to be a momentum trader. And I'll
say that learning when it's cold is not
such a bad thing because it teaches you
discipline. With that, I'll remind you
as always that trading is risky. My
results are not typical and there's no
guarantee you'll find success whether
you trade with me or you learn on your
own. So please manage your risk and
always practice in a simulator before
putting real money on the line.