Last week was the craziest week since perhaps the last time China sympathy names went crazy off the HKD momentum. The main runner at the time was AMTD. It’s been quite some time since we’ve seen that intense of a short squeeze. Yes, we’ve had some wild moves like AI and CXAI, but the amount of volume, shorts trapped, and lethal moves were not even remotely close to the path of destruction that TOP created for those who had their risk management really tested for the first time.
Most of the moves this week started to speed up after the dip and rip candles. That was the topic last week on scan. My goal with these Sunday videos is to get you prepared for the week ahead. There were MANY spots this weekend that the squeeze started after the dip and rip candles noted in the room. It obviously started with TOP, then MEGL and HUDI towards mid-afternoon.
It continues to be tough to have conviction inside small cap land. RIOT MARA or other big market moves, no problem. In small caps, the big issue lately is they get crowded fast. If you’re right, great, everyone wins. If not, and you’re wrong, it gets bad, QUICK. You’re either right or REALLY WRONG, and FAST.
Last week whether people want to admit it or not, there were a lot of blow-ups. Those moves don’t happen without blown accounts on massive short squeezes. It sucks, I’ve been there TOO many times before I finally sucked up my pride and put a MAX STOP on my account. I may be right the MAJORITY of the time, but if I get stubborn on an OUTLIER SITUATIONS it gets REALLY BAD, REALLY FAST. I wouldn’t wish it on anyone – even my greatest trolls. It’s not fun, it’s almost like a helpless moment where LITTERALLY your entire career can flash before your eyes. Some will make it out, some won’t, and even better, some will owe their broker money. That’s the worst.
As we’ve discussed before, EVERYONE is at a different stage in their career. We are all at different spots on our journey. For me, the days of crazy PnL swings and outlier risk is over. I preach about MAX STOPS on the regular. That was the biggest change I’ve made in my career to prevent these situations. I’m usually right on trades, but, when I’m wrong, if I do the right thing, I’m good if not, and I get stubborn, those names tend to get wrong REALLY FAST. That’s where the max stop kicks in.
So getting to the point of this week:
Was TOP predictable?
The problem on Twitter or on a video like this is as soon as you answer that question, if you say YES, then you’re automatically dismissed as someone who is just trying to prove they were right, say they called it, or is an after the fact I told you so kind of person.
I want to challenge that.
There is a difference between claiming you called it and riding the move etc and IDENTIFYING that it had the POTENTIAL via the price action EARLY.
That’s really all I care about. So is that move PREDICTABLE? Eh, no – not really. No one knew. Was the POTENTIAL OUTLIER SITUATION predictable?
ABSOLUTELY 100%
I look at things from a risk perspective.
Where have I seen this before?
Is there a real edge?
If I’m right what is the reward > risk
If I’m wrong is the speed at which this could reverse a problem?
What is the market favoring right now?
Is it worth trading the name?
$TOP having a field day w/ stubborn shorts.
They created fake SSR picture – huge offers w/ big bids crossed bunch to the bid side created appearance of weakness & now making stubborn who ignored pay.
Great warnings AHEAD – literally carbon copy $ILAG
Should be great later. pic.twitter.com/ZsmTrMYuW5
— Nathan Michaud (@InvestorsLive) April 27, 2023
So yes – for those in the room and even those who follow on Twitter, you saw the warning, the comparison, and the visual connection to ILAG. The same trap, same setup, not ONCE but TWICE during the day.
All I care about is the SIRENS going over:
1. This is NOT a short
2. This is an AVOID
3. Maybe, just maybe, it’s worth an “option” strategy long
Again before I lose you rolling eyes and thinking the point is that I called it – once again, NOT the point or the goal.
Did we know that THIS could be an outlier event? Did all stars align and check all boxes? YES, and you knew AHEAD (time stamped).
THAT IS THE KEY TAKEAWAY HERE
So when this situation arrives again, can YOU identify it as EARLY and TIMELY as I did? The sooner you can see it and know to be hands-off, the better. Heck, you may even be able to get long one day.
So what were some of the warning signs?
1. ILAG comparison at $7/share
2. Discussed the “fake SSR” painted picture
3. Telling people all day to stop seeing what they WANT to see {ie: it’s heavy, failed follow through – NO! ZOOM OUT)
4. Tweeted to ONLY trust FILINGS not random websites re: ‘offering’ that was circulated on Twitter encouraging people that red was coming and advertising full size short positions
5. Seeing the SAME trap we saw at $7 in the $15s discussing the huge offers coming in while they soaked and trend did not break
Where have you seen that $MEGL trap before?
I know it's been a while … https://t.co/qbdWE87Evy pic.twitter.com/yBNzFNH60Y
— Nathan Michaud (@InvestorsLive) April 28, 2023
So, AGAIN was it predictable?
On TOP the likelihood of a potential OUTLIER event was HIGHLY HIGHLY predictable. Does that mean it will always work that way? NO!
This, to me, is where risk > reward. Risk > edge. This gives me pause. When I see these situations form sometimes it won’t turn into anything other times like CXAI or TOP etc. accounts are saved. At the end of the day, that’s the goal.
As I said before, we’re all at different stages in our career. I’m not old (debatable), I’m 37. But, there are a lot of 20 year old traders in the space now that can go through those swings, emotions, draw downs etc. For me, married, 2 kids, homes and all goals for less headaches and stress — this is why you see me show up every Sunday and divert attention away from these situations and talk about how they’ve become less and less of a ‘desire’ compared to years past. .
You can come up with 2 scenarios – one how it ends and one how it begins. If you’re not okay with either scenario than it should be an AVOID. Are you good if it stuffs and slams into a circuit halt down then doesn’t uptick until $3-5? Then avoid the long. Are you good if that swipe into a circuit halt before 4PM and don’t open it until closing bell only to break accounts after hours? If you’re not good with that – then at 12:20PM you knew not to be short as I had written.
$TOP thought process for the circuit into close 👌
It pays to be at IU 🔥https://t.co/a7xIXvbtqy https://t.co/nno0YEfVvY pic.twitter.com/RLa10RTZhM
— Nathan Michaud (@InvestorsLive) April 27, 2023
This is about identifying POTENTIAL outlier risk. More often than not you’ll likely be TOO cautious but as the market melts up higher, $$ is being made, moves are happening like CXAI …….. PEOPLE GET COMPLACENT.
It’s no different than HUDI – was the idea right? Did I suggest they were going to unwind it AHs that no one was going to hold over because of TOP. Everyone would cover into close. Brokers would go to cash only. Etc? But, did I make $ on it? Nope, I actually lost some. I waited for the parabolic move after the dip and rip candles came in gave it a shot and moved on. This required holding into AHs for the move.
I HAD VERY HIGH CONVICTION IT WOULD FADE AFTER HOURS? But WHAT IF it trapped anyway? What if I was wrong? The reward if I was right vs. the DESTRUCTION if I was wrong was not in line. So sadly it was an AVOID, despite working flawlessly. Remember BETTER TO WISH YOU WERE IN (HUDI), than wish you weren’t (TOP).
And just to kill the last piece of the debate: “Max stops don’t work after hours” sure we can use that EXCUSE as a reason to rationalize why we lost. But, are you being truthful with yourself? You know damn well that CXAI went to $69 ago after a close like TOP so why would you ever carry today’s issue into tomorrow? In my opinion CXAI may have fueled the TOP move because people look at how it ramped to $69 and unwound likely giving confidence that TOP would have a similar outcome.
Also – one last tidbit – did you know anyone long? No right? Just knew everyone looking to short but yet it kept going higher. Is that not a WARNING SIGN?
Better to MISS out on a huge win than take a regrettable career ending loss. We talked about this ‘desire’ to nail a trade in the room. I shared the conversation on Twitter. That’s the ‘addictive’ side of trading. You know right from wrong but yet it draws you in anyway. You feel the ‘NEED’ to ‘NAIL’ the trade. Why? If you can combat that, you’ll have a better chance in this career path.
Most won’t read all that text above and that’s fine – I will likely do another video this week diving into all of this. I think it could be really beneficial.
T-Shirt Winners
- Michael Burkly
- P Metty
Video Scan and Game Plan
Stocks to Watch
HUDI frustrating to see it fail so much but I am hopeful we get a push $8-9 and then fade back $3-5
TGTX big move AHs – ideally reactive trade tomorrow.
Failed Follow Through:
TCJH morning shoves and unwind
MEGL morning shove and unwind – squeeze likely done but obviously be cautious.
UCAR nice trader on Friday – thinking it gaps down looking to fade any trend that fails.
Continuation:
WULF break out look – no position.
TIO still going – we’ve been over this many times all the soak candles = longevity.
OSCR Break out look watch dips if it sets up for break out
MF I bought some on dips but we’ll see if any follow through given China fades AHs. If no follow through I’ll bail.
IMMX so far so good from big picture idea other day.
Staying Familiar:
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