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Another big unwind week in the markets, absolutely killing the small cap flow.
Last week, I talked about how a lot of those secondary moves in small caps I didn’t exactly trust as “bullish” but more so, just relief rallies. It was my belief they were caused by a lack of supply but steady demand from covers given the volume we had come into small caps since TPST. In other words, momentum came and went, but for those who didn’t use that liquidity to cover their shorts and stuck around the liquidity hunt ie: search for supply to exit their positions was moving things up for secondary moves. Once the liquidity pocket was found, covers finished, and liquidity was shot.
What does that mean?
I compared BCEL to BPTH or things like SECO where, yes, they were rebounding and appeared to be starting a secondary leg off a higher low, but all of which were short-lived. The bounce is created by bag holders averaging down, dip buyers, etc. and the break out fueled by short covers. Once that cover was done, the market and liquidity was gone.
You can see the volume difference in moves like LIAN (bullish) BIAF vs. APLM ABVC etc.
Understanding where potential liquidity pockets are can really help prevent you from getting chopped up. Where do they need to test? Can’t say I performed very well at this over the last two weeks personally, but notable regardless.
APLM ABVC etc, all great entries, great fades, but totally dropped the ball on the patience trade. When so many unwinds work in a row, I start to get more and more cautious w/ the fades, and a week like last week left a ton on the table.
My favorite higher confidence is not the ‘flavor of the day’ type of trade it’s the ones that are over extended on daily and just waiting for the set up to form ie: TAL SAVA MULN etc. Sometimes they have intense liquidity and thus even better set ups other times lacking some volume ie: SAVA but still right into wheel house and solid high probability set ups.
- Project Impact
- SAVA MULN types vs. daily small cap flavor (familiar vs. fresh face)
- ABVC familiar face? (database -> historical analysis tool / Twitter/X)
- False sense of strength (buy ins)
- Macro unwind = less staying power small caps
- Bias vs. what you see (using info from day before – slow fades vs. flush everyone wins BTAI)
- When daily + intraday lines up (Macro unwind look) WW APLD ACHR FNGR BTDR VIRC
Video Scan and Game Plan
Stocks to Watch
SAVA best to keep on watch when everyone stops watching it over the next few days. I’d like to see a few more morning shoves for failed follow through set up – similar to Friday and similar to even MULN type of trade where it swipes off open and then never looks back.
TAL higher better for unwind possibly like EH (which btw insane gap fill on daily)
F reactive trade depending on market – either gap up for fade back red or gap down flush and reversal – prepared for both. Again, not trying to make a call one way or the other it’s a trading vehicle right now with a lot of volume. If you trade volatility well much like when XPEV is moving or PLTR IONQ etc. – I like to focus on these situations.
AVTR ideally relief rally and pressure
Failed Follow Through:
LABD monitoring for the day we bounce on the overall markets. I think we are close to one big bounce on the market which will really fuel some major pivots perhaps biotech etc. Typically the longer these are in trend and panic is present there these start to over extend and build a premium. As the day comes for the bounce these things absolutely melt so much so they suck you back in the next few days and take your $$ right back. So, be aware trade the set up and move on. Don’t keep going back to the well. These can sink one day and then head right back up the next as soon as panic is back in the air.
FAZ same as above re: financials
MULN great trade on Friday – ideally same thing again back towards mid .20s – very clean short off open Friday idea.
HUBC is not going away .80 becomes key. This one reminds me of QBTS.
SPEC same concept as last weeks LIFW – watch if weak open and ramps up.
NRDS dips for break out potential
IBRX so far good from liquidity trap idea all week – thinking we could have many more days of upside before it pulls back. Feel like they’ve faded it enough along this move to promote a bit more longevity.
LIAN thinking it may need to build a few days before next move – great idea in the $2.3x’s so far.
BTAI watching dips for break out
TOP wash wash (example to review)
EJH watching for their exit move