The 10 Rules That Catch Big Reversals (BEFORE They Happen) transcript

But what I really am here to present today is a capitulation fade trade and how elite traders identify the market extremes. Capitulation, waving the all white flag. What really does this mean? It's the extreme selling or buying that's driven by emotion, margin calls, and traders caught off sides. It's that final exhaustion move lower or higher where everybody is finally throwing in the in the towel. The longs are giving up, the shorts are crying uncle, and these situations often create short-term imbalances that create opportunities for reversal traders.

So, with these setups and these opportunities, the trade, of course, is going to be what I termed buying on the right side of the V, meaning once that turn is is in. So, if something gets too euphoric, you short the backside of the move lower. If something is getting too panicked, you buy the backside of the move and try and catch the move higher. The beauty of capitulation is this. The easiest money in markets with the least amount of pain, the type of trading that leaves you happy and stress-free is trend following.

Now, I chose to not do trend following because I don't like happiness and I would prefer stress and struggle and pain. And for whatever reason, because of my trainer that I was being mentored by, he really focused on reversals and mean reversion. And you would take a lot of heat doing that. But the beauty of these trades is that they can be very reactionary. With a lot of trend following, you need to identify the setup, you need to be filtering, you need to be scanning.

But with reactionary trading like mean reversion, you let the kind of blow up and the euphoria or the panic happen and you skate to where the puck is. You can be purely reacting. So, I don't need to be proactive, I don't need to be looking at anything. Once these big moves happen, I can find them and then step in. And these mean reversion trades, the beauty of them is that when done properly, they are some of the highest probability, high reward setups in markets.

And they apply to all time frames and all products, and they have been pretty much the staple of my career. Notably in 2024, it was one of the biggest trades I've ever done, which was in the Nikkei, and this was a classic mean reversion capitulation trade. So, we are going to be dissecting some of that. And the way you I think about executing a trade is first you need to be able to identify the setup, then you need to be able to execute within your system and your playbook.

What I really, really, really want to do here is focus on the identification side of things, because the secret sauce is always in the details. And what so often happens for me is I will say, "Oh, look at this setup that I traded." And then people will say, "Oh, just like this one here." And they'll show me four different charts that could not be any more dissimilar. And so, I think one of the great things we can do with this time is get very, very nuanced on what I'm looking for and allowing you to hone your own view of the market for this type of setup.

Cuz ultimately, we all know you can't just blindly short every up move and you can't buy every down move. Markets are very, very efficient. The places where we have meaningful edge, it's so, so specific. If you were to look at SMB's P&L, where they make the big money is in such a small subset of trades. And the desk during those trades tends to all hone in on them. We all know the big opportunities, like the MSTR capitulation or the SMCI trade that some of the prior speakers have discussed or even silver previously.

And some might right now in the current moment be thinking about oil. And my challenge to you all right now, before I dive into this, is to ask is oil the same as these? Is oil one of these capitulation trades? We'll find out. But what it really comes down to is stacking as many variables in your favor. And so even with some of the some of the handouts, um I know um was it um Oh god, was it Jeff that was doing that made the joke about the scorecard block and and and doing all that?

I think it was Jeff, yeah. And um ultimately what I did for this is also give you a cheat sheet based on these variables. Because what I'm doing in my head is I have this framework of the variables that I'm going to cover, and I'm really rating every setup mentally by these variables. And the more the better. So here's a prerequisite. For every single thing I do, it needs to be an in-play stock. It is the foundation of all of my trading.

Pretty much every trader I work with, not not everyone, but most, at least 95%, they are solely focused on in-play stocks. What is an in-play stock? It is a stock moving on huge volume, huge trading ranges greater than average, and it's often initiated by news or a technical pattern. So large ranges, large volatility, lot of price discovery, lot of emotion discovery, lot of emotions, um that's what allows us to have edge.

So now the variable number one, acceleration in speed of the move. So often I say it's not about how far a stock goes, it is about the rate of change in price over time. So So the math magicians in the audience, we have uh you know what what you all would call an asymptote. And uh you know, I'm I don't remember math too well. ChatGPT can help me for that. But what you can see is essentially a waterfall pattern or vice versa, you see um See, this is where I could beautiful.

You see that guy, which is kind of you know, the inverse waterfall. And so it's not about just how far it goes. Stocks and anything, look how big the move in silver was November, December, October, November, December. Something as boring as silver went up from the lows in last April, something like three, four X in less than a year. But if you were shorting that move saying, "Oh my god, silver can't go up 100%." Well, guess what?

You know, you blew up by October, probably. So, number one variable, acceleration. Not just how far you're going. Are we accelerating? And the way I think of that is the slope. You don't want something linear at a slope of one or negative one. You want something that's going and then accelerates. So, increase in price over time is everything and the most important variable in whether a leg is sustainable. >> [snorts] >> The slope of the move is more important than the length.

I do not care if something is up 10, 20, 100, 1,000%. What I care most about is how it is going there. The flatter, low slope moves are often the most sustainable. So, and for the most part, just for ease, I'm going to be using the laser pointer on this uh right one for you all. So, what I mean by that, this is a chart of MS CR back uh this was uh when it did its little exhaustion gap. Notice this acceleration here. Over here, we're pretty steady.

Here, big bar, big bar, big bar, really, really big gap. So, if If were to graph the slope, it's pretty linear, it starts to accelerate, we go asymptote. Not this linear patch right here. All of that is linear. And so, if you were to ask me, did I short here? No, I didn't. Why? Because it's it's not got that asymptote shape. If you were to ask me, did I short anything in here? No. The only place to really short, where we really got truly parabolic, is up around here.

And sure enough, you know, that is the opportunity. But for most stocks and most things, 99% of the time, it's not this. Like think about how many tickers there are. How many things are trading. How many days, how many intraday moves. We are looking for the 0.001% and nearly everything else is highly efficient. Variable number two, multiple days in the same direction. In an ideal world, I'd love to see three or more days.

The more days, the better. Particularly when coupled with the first variable. Now look, again, I said all of this makes up a really big mental checklist. So, it's okay if sometimes if you get just two days in a row, if everything else is amazing. And it's okay if something doesn't go truly parabolic if it's something like nine days down in a row, right? Everything's on a spectrum is how I think about this stuff. So, this part from purely this variable was actually quite appealing.

It doesn't have a lot of the other variables that we're going to talk about, but we did go, you know, 1 2 3 4 5 6 7, something like eight down days in a row. If we contrast that over here, we might get a down day, but we get an up day. We get a down day. We get an up day. That type of down up down up, that is not really the waterfall clear price action. Now again, that doesn't mean it's not going to bounce, it doesn't mean I'll never play it, but again, this is all how we're building that framework and putting all of these on a spectrum.

Significantly above or below the Bollinger Bands. For those that don't know Bollinger Bands, it takes a 20 period moving average. Of course, you can pick whatever period and it's two standard deviations away from that. It is how I visually judge just price expansion and how far something's gone. Then the beauty with with them is you can measure how far away you are in terms of dollars or also percent. So, if we take the silver example I was talking about, a lot of people might get get trapped in here and say, "Oh my god, one day up, two day up, three day up." Or you can look and just say, "Look, dollar-wise and percent-wise, silver's gone really far.

But we're not hitting the variables over here, right? This is going very, very steady. This is the only day where we're above the Bollinger Band, but we're not that far above it. Where do we really, really, really extend? All the way over here. Look how far we got there. And even as a percentage away from the Bollinger Band, it's really far. And a percentage from the moving average is really, really juicy. So, I often view the potential reward, like if the moving average is the equilibrium, and I view that as reward should we mean revert to the equilibrium, I want us to be as far away from that equilibrium as possible cuz that distance there, that's all reward.

And only in this bar, where we put in a really nice reversal, were we far above that Bollinger Band. So, the beauty of this variable is it keeps you out of a trouble a lot, right? Most people are taking so many paper cuts fighting stuff like this, where it's still it's still pretty much in the range. You know, this is getting above the Bollinger Band, but not that far. And this is barely above. So, a lot of people are fighting, fighting, fighting.

And they'll And they'll say, "Lance, I'm taking so many paper cuts. Like how do you not take paper cuts and all these losses?" The answer to that, to improve your win rate and get that really high up there, to have positive expected value, is you're aligning all these nuances. Variable number four, and this is also one of the most important ones that a lot of people sleep on, especially in retail world, where many retail traders do not have the Bloomberg, they do not have the Reuters, they don't have all the news quacks.

So, fresh news often signifies a fundamental change to the value of the company. Often I'm looking for moves that occur multiple days after the news or a technical breakout. In general, I try not to fade fresh news. So, guess what? Let's say a a stock comes out with some earnings or some other piece of news, and all of a sudden it gaps down 30%. If you're thinking of mean reversion far too simplistically, you're going to say, "Oh my god, this is so juicy.

We're so far below the lower Bollinger Band, we're so far away from the moving average." But, what is news? News is a fundamental, or at least potential, for the fundamental repricing of a company. Mean reversion is a bet that the equilibrium is the right price, and we're going to go back to there. But, when something has news, all of a sudden it's not the same, right? If Apple is trading at $100, and they say all of a sudden we're earning half as much, and it goes down to $50, it shouldn't mean revert.

The company's earning half as much. It's probably worth half as much, right? So, at a very simplistic level, you need to be extremely careful of when there's fresh news. Now, take uh the situation in the oil market. So, many people are comparing oil to silver. Silver, there wasn't really fresh news. Like, you could argue as a theme dollar debasement, but there wasn't anything really triggering that final leg, or really any of those legs, right?

There wasn't an "Oh my god, 30% of the world's silver has disappeared and got missing. It wasn't anything like that. It wasn't oh my god, all of a sudden silver is used to power chat GPT. There wasn't a fundamental reason causing this. Now, if we look at oil, of course there is a fundamental difference. Right now, there are not meaningful supplies of oil going through the Strait of Hormuz. That's a meaningful supply disruption.

That's a fundamental repricing of oil. If that supply comes offline, what is the right price for oil? So, if I'm trying to mean revert oil and say, "Oh my god, you know, um just uh WTI crude oil went from 60-ish, 65-ish to 90, I'm going to expect a 50% retracement." Well, guess what? It doesn't work that way. Not if all this supply is gone. The other issue with this is what if that supply stays off? Or what if things escalate?

There's no reason why oil can't go to 110, 130, or especially with front month fruit futures, if something really crazy happens, there's no upper bound. Right? So, you need to be so careful with fresh news. Where that gray area happens is obviously the war in Iran is going on. You need to be very careful because if something starts at 65, then we gap to 90, nothing too significant changes, but then we go to 100, 110, 130, then we exhaustion gap to 150, and it's days after that news, it's you know, it is subjective to judge what's meaningful, what's what's different, and that becomes fuel over time, but then that's where you get interested in.

And there are definitely moves that are kicked off by news, but then there's no significant news, and it's just pure price action after that. Uh this was one of the rare earth um minors uh back uh last year. So, we had a piece of news right here. So this for the most part on day one news here, I I don't really have any interest in shorting that. This is is fresh to or sorry, I flipped my charts. This had news here. So up here though, right?

This was day one of the news. We then kind of made that move. Then we got so much bigger and really got far above that Bollinger Band. There was no fresh news this day. This was the fresh news. Days later we really got so crazy extended. Not the day where we do a fresh news. And it's not to say that this can't pull back, right? Like this this was kind of like a doji-esque candle. This did pull back considerably. But my eagerness to short something like that is going to be way way different because this is trading on fresh news, whereas this is just pure price action.

So that's the point I wanted to differentiate. Variable number five, huge increase in volume multiples above average. The longer I've been trading, the more and more I've come to focus on volume as a variable. And I think everything at the end of the day comes down to sentiment and volume. And that's what tells the real story. And so often huge volume often signifies the panic or euphoria. The more extreme, the more people are getting flushed out.

And what's happening on on a psychological basis is all the volume that might have had a higher cost basis. If if you're doing five times the float way way way lower, pretty much the average holder is getting a new cost basis. If everybody was holding a stock at $100, we totally panic flush out down to $40, and we do 100 x the volume, the average cost basis isn't now 100 and the average person isn't now down 60%. They're now averaging $40, and if that stock starts to bounce, they're in the money.

It's a totally different psychology. And you'll see so often on the big moves, even if you look back on silver, um and gold, it's really the volume that so often tells the story. I love seeing um multiple average daily volumes, and I love seeing a huge percentage of the float. And if you look at some of these examples, so this right here, massive massive volume capitulation. Um we've got a lot of the other variables we've discussed, you know, 1 2 3 4 5 days down, huge volume capitulation.

Now, on some of these other days, you know, we're not getting the volume. All of this volume is in line with that average. The best plays, you want to get volume that just makes all the other bars totally dwarfed. So, volume is going to be so so critical in aligning a lot of this stuff. The other thing I'll do in practice is, let's say silver is trading. Um I'll be looking what the volume has done between 9:30 and 10:30, and you can go back to some of the prior days.

And you want to compare it not to even here, but what did what did the volume do 9:30 to 10:30 on the day before, when it's already elevated? If all of a sudden you're doing multiples of already elevated volume, that is a really really good sign. Because, of course, we don't know the full daily bar's volume until the end of the day, but that's how I kind of extrapolate it. Variable number six, and I think this is one a lot of people sleep on, and it's so so important.

The more legs in the same direction in the move, the better. More and more people end up chasing on the later legs, thinking the trend will keep going. Consecutive legs increase the odds of a reversal, and consecutive legs increase the reward on a reversal. If we take something like this MSTR chart, what happened was this was almost the mini leg, we kind of pull back a lot, this was almost the second leg, this was the third leg.

So often when things make that third and often final leg, you get the really big capitulation cuz all the people that didn't want to buy and were unsure here, a lot of them end up kind of chasing here, then this on the really extended leg is when people lose just all signs of reason or if you're short, you know, you're thinking, "Oh my god, this is just going to keep going to infinity." And the more legs, then all of a sudden rather than the reward being to here, if I'm shorting all the way up here, the reward isn't just a retracement of this final leg, it's a retrace retracement of this whole overall move where that move back to the moving average becomes really realistic.

So, if we look on this other chart, this here is kind of the range. I'm I have no interest in shorting this first leg. This to me is the first leg of the move. I'm not interested because this is the range and we're just breaking out of there. Right? So many people are going to be wanting to buy that pullback. Um because it's it's just so close to that break of resistance. And something that goes so euphoric like this, you know, people were already probably chasing here, so then you get so many people less willing to buy here once it turns.

So those legs, the best moves will always be multiple multiple legs. And um it really is just something beautiful where like the probabilities of the trade working increase so much. Variable number seven, minimal consolidation during the move. Consolidation to me is price acceptance. That that's the market saying that at least for this moment in time, we all agree on the price, nothing to see here, nothing special. We're not going to get some big mean reversion.

So, if we're trying to get mean reversion, the less price acceptance the better. You do not want to see the stock consolidating throughout the move. So, this is gold. And here, you know, we see we see the price acceptance, right? You know, this made a leg, we pull back, we start to make another leg. We have a bunch of bars going across. You know, one, two, three, four bars going across. Where do we not get any price acceptance?

We kind of just go one, two, three, four. We do get a little doji bar, which can be a little bit of price acceptance, but then we go really big, really big, really big. So, now think about this. Just based on the variables I've discussed on this presentation. We had a bunch of, you know, minus this one, but we had a bunch of up bars in a row. These up bars really accelerated. And now if I were to graph this, if we had this line, this was linear slope, we start to go asymptotic.

And now this bar here, this is the one that's really far above the Bollinger band, really far away from the moving average, and this isn't moving on fresh news. So, see how I start to build this framework of all these variables? And all of this is going on in my head. So, I'm rating all of these things and doing that mental checklist. And I'm also staying out of trouble because here we just broke out of the range. This is almost just the first leg.

The bars are small. Here we have a lot of price consolidation. So, people will always ask, like, but how do you not take the losses on the way up? A lot of that is being mindful of these variables. And it's okay to, you know, maybe you take a little stab early, a little stab early, but when it gets really, really good is when everything aligns. Variable number eight, extreme sentiment. Some key words you always want to be aware of.

And this is where I love Twitter. Uh although I I never want to be caught saying those words. Don't don't quote me on that. Look for the words uninvestable, can't afford to not have exposure, new paradigm, or cheap at any price. There's so many times over the years that we have seen these. We've seen these with Bitcoin. We've seen these with silver and gold. One of the funniest tweets probably of all time was Lucas the short bear who was shorting silver having the pretty much the whole internet just bag on him for being short biased on silver and gold.

And people in the responses were saying, "Oh, you know, greatest investor/trader of all time. You don't get it. Dollar debasement. Oh, you don't get it. New paradigm. You know, the dollar's dead. Metals are the only safe haven. Yada yada yada." Well, guess what? If you looked at the chart of the dollar during all that chaos, the like UUP, which is just a dollar index, UUP was right where it was a few months prior. UUP was right where it was a year earlier.

And UUP was right where it was 3 years earlier. So, for dollar debasement, the dollar's dead, new paradigm, nothing was really new about it. What was new about it was the narrative. The narrative and sentiment. And so, what you what happened was you had this fever pitch of oh my god, the dollar is actually going to zero. And oh my god, the only way to protect my money is to be in silver and gold. If you are ever scrambling to buy silver and gold, the odds of you being late for that scramble is very, very high.

The other thing we've seen, this was maybe I think 2022, uh JP Morgan came out and said Chinese stocks were uninvestable. They were so uninvestable that within a week they were all 50% higher. And that's because you see these things happen at the extremes. How often have we heard you know, the new tech? Oh, it's you need this you need AI exposure. You need this you need that. You don't need anything. The only thing that can hurt you is unforced errors because of emotions.

And so you so want to be aware of sentiment. Even back during the the 2025 tariffs, remember what was happening to Tesla? And Elon Musk actually called this you know, quite quite perfectly. He had a town hall meeting when Tesla had gone from four something to like 200-ish. And he urged his employees not to sell stock. And he said, I know it feels like the Armageddon out there. Like let me tell you I've seen this before.

This is not the time to sell. You know, every headline is negative about us. People are literally burning Teslas in the streets. And when the world reaches those extremes for so many reasons, so many things in life tends to be cyclical and we swing back to the equilibrium. Guess what? We don't hear articles anymore about people burning Teslas in the street. We don't have I mean one Musk isn't as involved in the government.

That changed. And it's not this fury of sentiment. And so often those peaks in sentiment just can't be sustained. Especially nowadays when the human attention span is so short. There's a new crisis. In fact, there's probably been 20 since then. And rightfully so, Tesla ended up going 100% from there. It was pretty much the literal bottom. We did kind of double bottom, but it never really went lower. Why? Because when sentiment is so bad, you have such a cushion.

It's not that it can't go lower, but you have a massive psychological cushion. When nobody wants to own Tesla, when funds are dumping it, when I forget who it was, when people are on stage saying, "Oh my god, you know, burn all the shares, whatever." That's usually a good sign that you're close to a bottom. You can use um CNBC, Twitter, whatever to all gauge that. So, here's one of the famous quotes. JP Morgan upgrades Chinese stocks that were recently deemed uninvestable.

Takes to to uh I can't read what what that used to be, but blah blah blah internet companies just months after their bearish call. The oopsies uh you know, they're not as uninvestable as we thought. Turns out we actually made the bottom in them. Um what you don't want to be involved in is you know, Chipotle's fairly priced. I don't I don't care about stocks that are fairly priced. I want stuff for this mean reversion that's absolutely crazy euphoric.

Like even remember SMCI in maybe 22, I can't remember. 23, I think. Um maybe 24, I don't know. Anyhow, um there were Twitter polls. Where do you think SMCI is going? Now, keep in mind the stock had just gone from 250 or so to $1,200. I saw some poll where it was you know, is this going above 2,000? It was like something like 33% of people said it's going above 2,000. And it's like, wait. You didn't want to buy this at 250.

You didn't buy want to buy it at 300 or 400 or 500. Now that we're at 1,200, you think it's going above 2,000? Like this is the exact moment when it's actually least likely to keep on doubling, you know? Like when it's chilling in a consolidation and then breaks out, that's most likely to double. Once it's gone 250 to 500 to 1,000 to 1,200, it is probabilistically the least likely to keep on doubling, you know? Um and so that is what happens with sentiment.

It's all reflective thinking that drives the narrative. And what was so interesting about the silver move and why I was so kind of in supportive of the short bear and the bear camp, which I guess is is the same, is you would see this narrative of oh my god, you know, China's buying up all the physical silver. Oh my god, physical demand, blah blah blah, you know, dollar debasement. I would look at the chart at the of the dollar and I would say, wait, the dol- the dollar's down a percent lower than where it was yesterday and it's where it was 3 months ago.

Why is silver up 10% today? That doesn't logically make sense. You know, or like people would say, um, this this physical demand and the hedge fund buy and this and that. I would try and find where that was coming from. There was no source, there was no proof, there was no like government buying that could be verified. It was all price driving the narrative, but that can't last forever and that's the stuff I want to be involved in.

Variable number nine, the more boring the better and this is a wonderful exercise to do. What defines something that is boring? You have the larger the market cap, which makes it better, the more boring the security, the better, and the more diversified the company. Let's say Berkshire Hathaway is at $400. How eager would you be to buy Berkshire Hathaway tomorrow at $200? Think we'd be quite eager, right? I think it's safe to say that, you know, the thousand plus diversified businesses, the brand, the goodwill of Berkshire Hathaway did not get halved over this weekend.

What about Apple? Think we're all pretty pretty confident in that. Now, what if micro cap biotech of sketchy repute goes from 5 cents to 3 cents on Monday? How confident are you that that's going to bounce? If If all of a sudden Dogecoin drops 50%, how confident are you that that's going to bounce? What about US Treasuries? If the US Treasury drops 50% in one day, man, that's a probably a pretty good bet that unless something really, really crazy happened where none of us are probably on our screens, it's probably a good bet that that's going to bounce.

And so this variable, if we're doing mean reversion, is so important. You want to know what tends to be really, really, really boring? A block of a metal that can't do anything, right? If you look at a 15-year chart of silver, silver hasn't done anything. And if you were to stroll out and look at the silver chart, what you would see is whoops, I don't want to do that. What you would see is an asymptote of this is silver chilling for 15 years, then boop.

And that's what we saw over the last couple months. And the point is is like most of this stuff that's boring, that's super well diversified, that's super big market cap, the fundamentals and the actual true, like {quote} {unquote} value, doesn't tend to change that much. You want to know what does change? Sentiment and narrative. It's sentiment and narrative that drove silver. Right? It's not the actual, you know, {quote} {unquote} value of that.

Same if if Berkshire Hathaway panics. So even um I talked about one of my best reversal trades ever when the Nikkei panicked. Part of what made the Nikkei panic so appealing is the Nikkei represents the Japanese stock market. What are the odds that because of a small, you know how I talked about like silver moving while the dollar was right where it was? What triggered that Nikkei move was a move in the yen. The only issue is the yen didn't do anything that that crazy.

The yen just went back to levels it it it previously was at. Meanwhile, the Nikkei was falling like 30% over the course of a couple days. Did the Japanese economy and stock market actually change? Did the whole country's future value fall 30%? You never know, but it's a bet I'm willing to take, right? Same for stuff like silver. Same for some of these conglomerates, right? Like Coca-Cola's been around 100 plus years.

Stuff like that is going to be stable. Not always, you got to be careful, right? But I'm way more likely to bet on these things reverting and being more narrative than fundamental change than a biotech. If we look at some of these charts, um this was I know it gets cut off. This was actually Berkshire Hathaway. This was Berkshire Hathaway making a really big move. We had a massive gap. Um and sure enough, guess what?

Massive gap down. We retrace and we go all the way back to where we were. Um this was I believe this was a biotech I chose. I think uh I think this was um BMRN BioMarin, I believe. And you know, this I'm going to be less interested in mean reverting. I'm going to be far less interested in buying into something like that. Something like Berkshire Hathaway that's super diversified, super large, way more appealing. And if you follow these charts, if you look for the big flush outs, the big panics in these large stable companies like Berkshire Hathaway, what do you know?

They tend to bounce well. Um not a coincidence. My final variable for you all. Anytime when market structure and non-fundamentals are magnifying the move. What do I mean by that? Always pay attention to margin calls. Always pay attention to forced liquidations and other forms of forced selling or buying. You want to find the players offsides that are forced to close positions at prices that are unhinged from fundamentals.

In the silver move, you want to know what I did here as fact and know as true? The margin was increasing. So, if you were short a lot of silver and it kept going, going, I know as a fact margin was uh you know, margin rates were increasing and so a lot of people probably weren't able to hold that position. That's real. That's real forced market structure that creates a price move, often which can divorce itself from the underlying fundamentals.

Cuz I promise you, those couple of those final days in silver, there was nothing fundamental driving that move. What was driving it is a lot of the forced selling and buying. And so, what I want to highlight, this is Circle um following its IPO, right? So, investment bankers get together and they say, "What's the appropriate value for this company?" Very smart bankers did that and they said $30. Okay. Let's say the bankers are idiots.

The stock opened $60 and then traded to 80-something. Within a couple weeks, we were at close to $300. What's more likely? The investment banks that spent months valuing this company were off by a uh you know, factor of like 10 or that the low float and the market structure and everything else ended up really creating something crazy in this. So, what you saw is the margin rate increasing, increasing, increasing on this, especially into that final move to 300.

So, then what you see, oops. What you see is this was after it started to crack. The right here, there was a buyer at 245 on the tape. He would drop for a split second, come right back. Why would somebody just buy for hours and hours a stock at 9x where it was priced a few weeks ago. Why would someone want buy millions and millions of shares? They don't want to buy, they have no choice. No no rational person, for the most part, unless something really crazy happened, says, "I want to buy millions of shares 9x higher a few weeks later when nothing has changed and none of none of them say, 'Oh, I'm just going to do it as blatantly as possible at the same price.'" This is, "Hey, you need to close this position or you're bankrupt." And and this is your broker forcing you to do it.

And so this was the footprint saying that guess what? This price move up here, this is not fundamental. This is forced buying. Someone has to buy millions and millions and millions of shares that they might have shorted at 70 bucks or 90 bucks or 110 or 130 and they can't hold at after it's gone to 300 and the margin gets jacked. So that's the footprint of there being a mispricing due to this forced buying. Then the buyer breaks boom, it's gone.

And it pretty much never came back to those levels. Um this is just pure noise, right? There's no real clear signature here. This on the tape you could see the 245, we break, we're gone. So that's the final piece. So look, I know the the next question of course is is how do you then trade this stuff? I get that. For this topic, I could really only cover one or the other and the way more important piece is to build the foundation first.

So that's all the variables I used to spot this. Then I define the trend and how I look for a break of that trend and it's either, you know, a trendline breaks, the break of prior bar lows, or something capitulates intraday, or you get a break of the the forced buyer. So trading it is kind of the 201 lesson and I really wanted to focus on all those nuances to help you get the win rate up and identify the right setups.