Stock Squeezes Up 100% and I'm RED ON IT

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Transcript

What's up everyone? All right, in
today's episode, I'm going to break down
the price action in the market today. We
have a stock that just squeezed up over
100% on breaking news. But the stock was
easy to borrow and that meant shorts
were aggressive right out of the gates
trying to hold it back. It was easy to
borrow and it was not on short sale
restriction. That's a combination where
it means short sellers can essentially
market order on the stock hitting the
bid and pushing it down. So, it was a
battle and although it did go up 100%,
it wasn't easy to trade and I'm red on
that stock. Today, I trade three stocks
and I'm red on two out of three. Today
is my fourth consecutive red day, making
it possibly my longest red streak this
entire year, which is disappointing. But
on the other hand, the total amount that
I've lost in these four days, four red
days, is not that bad, relatively
speaking. So, I feel good about that. I
kept things in check today. I didn't
spiral. I stepped up to the plate, took
a few trades, didn't connect, and I'm
walking away before things get any
worse. So, I'm also after I walk you
through my trades from the morning, I'm
going to share with you my outlook for
the rest of the day and going into the
rest of the week, tomorrow being Friday.
So, at this point, I think it makes
sense to take a little bit of a look
back at the last few days and try to
figure out what's been working, but more
importantly, what has not been working.
Okay, so if we jump on the screen share,
you can see NXL. This is the stock that
squeezed up 100% but was easy to borrow.
So yes, we had a nice rally. It began
early this morning with news that came
out at 830. It's a US company, medical
equipment supplies, squeezes up to 7,
drops back down. Pretty big drop.
Rallies back up, breaks through the high
and drops down again. And that's a very
difficult place to take a trade because
I never have a lot of conviction when
you have a drop that goes that far down,
even below VWAP. So then it rallies back
up. It pulls back and I broke the ice as
it started to what I thought pull away
up here at about 723 750. We get a
squeeze up to 8. We dip down. I add back
right here for the first candle to make
a new high. MACD is positive and we
flush down. Is there any indicator that
that was maybe not going to work?
I would say one is that the volume on
the test of eight was declining relative
to the volume on this one candle. So in
total, there was a lot of selling and
the buying volume wasn't really that
strong. So it was already pretty heavy.
Jumping in for that first candle to make
a new high, the pattern made sense. But
in the current market, combined with the
sentiment being a little bit lower on
this stock and it being easy to borrow
and not on short sale restriction,
not a good not a good probably decision
to take that trade. But in any case, I
took the trade, took the loss, stopped
out. It sells off, goes below VWAP, then
rallies back up here, micro pullback,
and suddenly out of nowhere, bursts up
here to a high of 840. All right, that's
a little bit annoying. Candle comes out
of nowhere, and then it grinds higher.
Topping tail dip, toppingtail dip,
toppingtail dip, topping tail dip, and
now it's halted coming back down because
of this loss right here. I'm red on at
$2,816.13.
You can see my P&L right there. So, red
on NXL and you know, you could argue I
maybe could have made it back if I kept
trading it, but on the other hand, I
didn't want to make things worse. You
can see the big E for easy to borrow.
Uh, it is 100% 300% margin requirement,
which means if you want to trade it, you
need 100% cash to trade it. You can't
use leverage to buy it. And if you want
to short it, you need 3x to short it.
This was not the case at the beginning
of the move. They changed these levels
as the price started going higher, which
is kind of interesting. They I've even
seen them remove easy to borrow. So,
there's times where they'll have a stock
that's easy to borrow and then once it
starts moving higher, they make it so
it's not easy to borrow. Um, so changing
the margin restriction and changing the
borrow status as the price goes higher
means initially it's very easy to short
a lot of these stocks, but then once
they start to pull away, they make it
more difficult. And that's a problem if
you short early in the move with the
expectation that you're going to add to
the position to adjust your cost basis
because all of a sudden you run out of
shares to borrow or you run out of
buying power and you can't do it. Um but
it also means that stocks can be slow to
get started because initially they do
have more headwind. On the other hand,
if you pull up a stock that in
immediately like Va is CB, which means
it's on the short sale restriction list,
it's also T on the threshold list and is
100% 500%. From a technical perspective,
this stock is set up to be a bigger um
to to be harder to short, which means
you could see uh more momentum to the
long side early on. And yet that wasn't
really the case with Va. It squeezed up.
It was really heavy. It pops for a
second. It pulls back. Now it's rallied
back up. But all things considered, it's
not been really that strong or easy to
trade. As a result, I took no trades on
it. Easy RA was another stock that
popped up just for a moment. Got in and
out of that in this spike. We had
breaking news right here, so I jumped in
it. Uh but it didn't hold up. So, I was
in and out with only $84 of profit. And
then LRHC, I had a few trades on this. I
was green on it initially. I jumped in
as this new spike um as it started to
pop up in at uh 280. I sold up at 3. I
added back at 315 and stopped out as it
came back down. And you can see that
trade right here. Added at 312 315 and
stopped out at 274269.
And that was my last trade of the day.
And that was $2,700 in the red. So, you
know, you look at these setups and it's
like, geez, that's a terrible that's
terrible. I mean, the stock is now down
16%. Unbreaking news. I know it's crazy.
Meds is another one that was up earlier
today. Uh, you know, for a little while
it was like maybe this will curl back
through the highs. Couldn't do it. So,
we're in a market where right now the
sentiment, the pendulum has swung to the
point where the shorts are very
confident and buyers are are timid and
including me sitting on the sidelines
not trading or getting small losses. And
so, the result is that that becomes
self-fulfilling. If buyers are afraid to
buy, they won't buy. And shorts see that
and so they're more aggressive. If
shorts are more aggressive and they're
doing really well, they're going to be
more take even bigger size. So much so
that you could have a stock with
breaking news that pops up for a split
second and then ends up being red on the
day. And on the other hand, in a really
bullish market, you could have a stock
with no news at all that pops up for a
second, pulls back, and the next thing
you know, it's up 200%. So those are
sort of the extremes between a hot
market where there's a lot of exuberance
and FOMO and greed and a colder market
where there's a lot more fear and of
course short sellers they have the greed
in them on that side to profit from that
fear and to suppress the stocks and keep
them lower. So I would say as we come to
the end of the week you know Fridays
have not been super solid for me as of
late. Um and I think there's a couple
reasons for that. At the end of the
week, companies are less inclined to put
out good news. You're more likely to see
a company put out bad news at the end of
the week in hopes that people forget
about that bad news over the weekend and
their stock doesn't get beaten up too
much. So seeing good news come out on a
Friday is just not as common. It's not
impossible, but it's not as common. So,
you know, that's kind of the first
thing. We're not likely to see that on a
Friday. The second is that there's not
as much time to recover if you go red.
And so if you go red, it's the end of
the week. And so I think that traders
tend when they go red on a Friday start
to get a little desperate. They don't
want to finish the week red or the day
red. And so they start throwing hailmary
passes. And that creates a lot of um
unpredictable volatility in the market
as traders are jumping in with really
big size and then jumping back out with
really big size, right? because they're
getting emotional. So, you're seeing
these big swings and unfortunately
um you know, at least the the way I've
kind of observed it when we see that uh
it's typically later in the day or
towards the end of the week. It's a sign
of desperation in the market and it's
it's very difficult to trade um to trade
well when it's like that. So, right now
um there's not a clear theme of what's
been working the last week. Not much has
been working. I mean, it's as simple as
that. We don't It's not really an issue
of like time of day or price range. It's
just been across the board very
challenging. And so, this is a time to
recognize that and ask yourself, do I
want to f do I want to swim against the
tide or do I want to wait to swim with
the tide? And so, sometimes you might
say, I'm going to be aggressive. I'm
going to push it and this is a good
enough setup that I'm going to try it.
it's worth it, whatever, whatever. Um,
but nothing today felt really worth, at
least for me, stepping up to the plate
in any serious way. So, small trades,
that's fine. Broke the ice, could have
built a cushion, wasn't able to,
whatever. It is what it is. Uh, but
nothing warranted stepping up to the
plate with big size today. And so, I for
the most part kept myself um, you know,
restrained a max size of 10,000 shares.
And, you know, you could argue that that
was too big and maybe tomorrow I should
go with smaller size. and maybe I will,
but you know, we'll see how things look
in the morning. My expectation though is
that tomorrow is going to be a slow
finish to what has been a really slow
week. So, I'm not going to hold my
breath and expect that we're going to
have an amazing day tomorrow. I could be
pleasantly surprised and I'm fine with
that. It's just not what I would expect.
Uh, next week will be the first full
week for uh the month of October, excuse
me. Uh so going into the month of
October uh here uh for first full week
next week and you know this is the time
of year Q3 when things historically
seasonally do pick up is not a guarantee
because we could have a slow October, we
could have a slow November, we could
have a slow December, but this is
typically when I would expect a little
bit more momentum. So, I'm going to be
um cautiously optimistic. And when we
start to see a bit more um you know,
decent price action, stocks are holding
up over 100% on the day, continuing
higher, that's when I can start to get a
little bit more aggressive. When I see
signs of life, I want to be aggressive.
And um and then the rest of the time,
just, you know, have my foot off the
gas, sit on the sidelines, and you know,
that might mean more no trade days. You
could argue, should the last four days
have been four no trade days in a row? I
don't think I've ever had four no trade
days in a row. Um,
I'd have to look back at all my trades
from the last four days
and sort of do a quality analysis of
them. I'm not sure. But if I just look
at today, um, you know, easy that trade,
uh, which I think was the first trade I
took of on the on the day, um, this
stock didn't have much volume yet. Yes,
I had breaking news. Um, I jumped in it
pretty quickly. We did have this
pullback right here and then this curl
back up. Um,
it's got a lot of room on the daily
chart.
We've got a breaking news catalyst.
You know, it's not easy to borrow. So, I
don't know. I mean, this one
isn't a bad setup. Um,
so I'm not really I don't know. I don't
know that I I guess I guess maybe the
one thing I would say is that um volume
profile uh had higher volume on these
two red candles. That's the one thing
that was maybe an issue. Okay, so volume
profile, but that's a little bit more
nuanced. LRHC,
this one I jumped in too quickly. I
jumped in it right away. It ended up
working um but that first trade at 280
was aggressive. looking for that quick
squeeze to three and then I added back
too high on it. So, that wasn't a very
good trade. Okay, I was being a little
too aggressive for this market. Um, and
then NXL, you know, that's a tricky one.
It it did end up moving. Um, you know,
certainly after I got out, um,
but, you know, at the times I got in, it
didn't really cooperate. So, I think
maybe I should have just said, "Look,
it's easy to borrow. I should I should
leave it alone. So, I probably could
have reduced my trades a little bit
today. Uh I probably could have reduced
them a bit this these past four days,
but to go to zero trades over the last
four days, I don't I don't think that
would have been that would have been
probably too conservative. It's okay to
lose. That's okay. You're stepping up to
the plate. You're trading a strategy
that historically over long periods of
time performs well, but any strategy
will have periods where it's
overperforming and then periods where
it's underperforming. That's the
reality. You can't expect, it would be
unreasonable to expect that you could be
a trader who makes the exact same amount
of money every single day regardless of
market conditions. If you were, I I
would question that. I would think,
geez, shouldn't you be shouldn't you be
pushing harder when the circumstances
are better? And on the other hand, when
things are slower, taking your foot off
the gas? The only people that make money
every day are the brokers, if we're
going to be real. And so as traders,
discretionary traders, you know, some
weeks, some months are better, some are
colder, and that's the way it is. So
anyways, I'm going to wrap this up with
a reminder as always that trading is
risky. My results aren't typical, and
there's no guarantee you'll find success
whether you trade with me or you learn
on your own. So, please take it slow,
manage your risk, and I'll see you guys
back at it bright and early tomorrow
morning streaming at 7:00