A Surprise 200% Short Squeeze on Chinese Stock HKD transcript

What's up everyone? All right, happy Halloween. We made it to the end of October. Thank goodness because this month was not easy. I'll be happy. Just forget it. Make it water under the bridge and let it go. It began with a small green week the first week of October. And then going into the second week on Tuesday, October 7th, I had a $172,000 red day, the second biggest loss of my career. Devastated. I spent about two weeks recovering that loss, which left me with this final week of the month to try to add a little profit to the month basically.

And I am green on the month, but boy, not by much. And this week didn't serve to add very much at all because I was green on Monday, but then red on Tuesday, red on Wednesday, no trade Thursday, no trade today. And that is in spite of right now seeing a stock squeezing up over 200%. So, I'll talk about why I did not trade this stock even though it's making a big move. And I'll also talk about what I expect will be the catalyst that ignites the next round of momentum.

Okay, so if we jump onto the screen share here, you can see HKD is squeezing up and yet this stock does not meet five pillars of stock selection because the float is too high. It is a former momentum stock. This is a stock that in fact made a really incredible move back in 2022. It went from about I don't know5 to $10 a share all the way up not to 100, not to 200, not to 300, not to 500, not to a,000, but all the way up to over $2,500 a share.

And yet, if we look at that day that it hit those incredible levels, the volume was 350,000 shares. That was that. Wow. So, it was extremely thinly traded and although it squeezed up, it came all the way back down here and has just been basically, you know, dead for a long time. So, over the years, the float has increased as the company has sold additional shares on the market to raise money. And so, today, when I first pulled it up and I saw that it was popping, I thought, well, at at this point, it's a 124 million share float.

That's going to just be too high. I really didn't expect this type of momentum even though it has a history of having made a big move back in 2022 because the float was this high. I didn't think it would work. So, the fact that it is up this much and currently has 143 million shares of volume, I think speaks to the fact that traders are here. They're waiting for something to jump into and people were willing to pull the trigger on this.

Now, I was not. For me, having been red on Tuesday and Wednesday, I don't want to have a third red day in a row. So, I took no trades yesterday because nothing was perfect. And I took no trades today because nothing was perfect. So, flat is better than red. If I had traded this and lost, I would have just been, you know, I I would have regretted it. I would have felt like, well, of course you lost. The stock didn't meet five pillars of stock selection.

And, you know, it's a Chinese stock. This is one that is known to be very difficult to trade. So, you know what? It popped up right here. It drops down. It comes back up again. Drops down. Comes back up again. So, now you've got this flat top around three. It breaks through, dips back down, pops up, holds that level sort of, then pulls away to 350. Dip, rips up to 44. Dip, rips up to 450. Jack knife candle dips, pops back up.

Another little red candle there as it drops back down. and now rallying back up again. Hey, I'm glad to see at least something moving, but for me, I just couldn't I just couldn't pull the trigger on it. And so, no trades on that one. Now, if we look at volume across the board today on stocks that are up more than 5%. HKD is leading the way. It has a lot of volume. Getty second leader. I didn't trade this one either. It's 177 million share float.

So, this is very unusual that two of our bigger moves today were higher floats, but I think it speaks to the fact that a lot of traders, for lack of anything better to trade, are pulling the trigger on these. Now, I suppose that's better than um what was it? FC. There was a stock earlier today um that hit our scanners. might be it's gonna take a second for me to scroll back and find it, but um it was it was a bit more thinly traded and it popped up.

Well, this was another one too. DFSC. This one uh popped up early this morning. No news on it. Went from 5 to 9, but then back down and then just been stairstepping lower. So, that one didn't really hold up. Then we had SSTK. This one popped up for a second, floats too high. Look at that, though. total rejection. Then NIVF, this one, we've seen this one before. Can't trust it. FMFC, this one popped up. Can't trust this one either.

And so this was the trend that we saw today. We saw a couple stocks pop up, but they didn't hold. So when HKD hit the scanner, I was like, well, surely this is not going to work. Um, yesterday BQ, you know, again, Chinese stock makes a huge move, gives back all the gains. So, I didn't expect, you know, in a million years that HKD would end up going up 200% today, but it did. So, you know, I I guess that's better than nothing.

But let's talk about what's going to really ignite the next round of momentum. And I'm talking about like some decent momentum. Typically, what it's going to be in this market, number one, shorts are going to be more aggressive because we're seeing a lot of reversals. In fact, we haven't really seen anything that's held up for multiple days since BYD. So, as long as it's not a meme stock, I think shorts are going to feel very confident adding and adding and adding and adding until it reverses.

It's an averaging down strategy. It's kind of like a Martingale strategy where you just keep adding and adding and adding and adding to the loser until it finally turns around. And it can work, you know, 90% of the time. And then the one time you lose, unfortunately, you can blow up your account. But that so that'll happen most likely if traders keep adopting that approach. But in the short term right now they're going to feel like they're winning and they're they are winning.

They're going to feel like they're on on top of the world because all of a sudden everything that they add short on eventually even though they have to experience a little pain ends up giving them that reversal and dropping back down. So typically what's going to happen is longs are going to stop participating because they're going to say, "Look, I'm sick of buying into false breakouts. This is a waste of my time. I'm losing money.

I'm I'm done with it. So, people will stop buying these initial pops. So, we're going to see fewer pops and shorts are going to start getting a little desperate because they're going to see fewer opportunities. So, when something does start to pop up, that desperation is going to lead them to start hitting it immediately. And so, take HKD for example. You know, this pops up and they're like, "Oh, yeah. Hitting this, shorting it, and it comes back down." So, maybe they cover some for a profit.

It comes back up. They start adding, adding, adding, adding, adding. It comes back down a little bit, but doesn't flush below VWAP. Comes back up. Okay, double top rejection. Adding big time short here for the reversal back down. and then it sort of gets back above VWAP and then adding here and then adding here and then uh-oh adding adding or covering or just keep adding just keep adding just keep adding just keep adding and now the cost basis is maybe you know kind of moved up to this area so they're still sitting red on it potentially right it's still well above VWAP it broke away here it pulled away and they're kind of hoping this thing just unwinds and drops back down and and it probably does because this stock has got 125 million share float.

But let's just say maybe this one ends up keep going or continuing and it keeps going or there's another one that pops up and they do this too, but the float is 1.2 million shares and then you realize that the news is actually pretty decent and next thing you know it's going to 6 to 8 to 12 to 16 to 18 to 25 to 40 and you cannot just keep adding and you the only way to get out is to buy. And so that now fuels even more buying, which is short covering.

And that is going to be the stock that ignites the next round of momentum, the stock that goes up a,000% in one day or more. That's my that's my prediction. And I could be wrong, but that's usually how these cycles um begin, the next hot cycle. So right now, we're in a cold cycle. And there are a couple ways to approach it. One is to keep showing up every single day and to keep trading with the same size you were trading during the hot market.

And the result is that you're going to get really frustrated and you're probably going to lose money. Second approach is you keep showing up every single day, but you reduce your size and you increase your quality standard. So you're only going to trade things that are really good, but you're here every day and if something does start to pull away, you'll get a piece of it. That's what I'm doing right now. The third option is that you say, "I'm just going to give up and come back in a couple weeks." And the problem with that, which some people will do, is that you'll miss the turning point. you'll miss that stock that finally, you know, pulls away and opens up.

And so, it's one of these expressions they say with investing is that you can't time the market. So, you know, when it comes to timing the market, you're like, "Oh, I'm I'm going to I'm going to get out because the market's dropping, you know, so then you miss this drop, but then you also miss the biggest green day of the year, right? Which is right there." And you know, it's just it's not it's not realistic to expect that you'll be able to get perfect out of the market here and then back in like right here.

Even the best investors don't even try to do it because they know they can't. You missed five, I think. What is it? There's this there's a statistic that if you missed 10 of the biggest days in the last, you know, decade, that it would have hurt your returns on the S&P 500 by like 50%. just the the you know just those top 10 biggest days if you had just taken all of those big big days out of the equation because you were trying to time the market it would have severely hurt your total returns and so I think of that with day trading as well that you just never know when you're going to have a big day the the days that I had this year that ended up being really big green days some of them I you know probably kind of saw coming because the market was pretty hot you know we go back to the month of July and obviously ly things were, you know, really strong then.

So, it was fairly easy to predict that uh oh gosh. So, let me log back in. It was fairly easy to predict that I was probably going to do pretty well um during that month. But, um you know, there were also some really great surprise days that I just didn't see coming and I'm glad that I was here to trade them and to capitalize on them because those individual days um you know, made made the entire month for some of these months.

So, we look at like the month of April and you know there's like 60,000 so a couple smaller days. Um you know days like this $175,000 that's an outlier. I mean I was doing well but then that's just you know out of nowhere. Um this individual day $278,000. I mean if you took out my top 10 biggest days of the year I'd be down it would probably take $2 million off of my total profit on the year. That's 30% of my year from the top 10 days.

Right? So, you know, that's the type of thing where for me it encourages me to show up every day. $232,000. I mean, it's just these are huge days. Now, of course, you know, big red days, they don't help, but but that's going to happen. So, now we've got the month of uh October basically in the books. I haven't imported my trades yet from Wednesday, so I've got to import those. But, you know, it's not going to be the biggest month that I um of the year.

It's in fact going to be my smallest month of the year. Uh but that's in part because of one really bad trade which is unfortunate. So now we're going into the new month of November. And so the question is how are we going to approach the new month? Is there any reason to think that Monday things are going to be dramatically different from they were today? Probably not if we're going to be honest. So, I would expect that my approach going into next week is that markets will be slower and I'm going to keep trying to I'm going to show up every day and I'm going to keep trying to break the ice, build a little bit of cushion and if we see something that starts to pull away, then, you know, I'll step up to the plate and take some more risk.

But if we don't, I'm just going to keep chipping away on small green days and maybe even no trade days while I wait for things to turn. And then once they turn, I'm not sitting on a big draw down that I have to recover from. My account is at or near all-time highs. And I'm ready just to add some icing to the cake for November and December. So, the month of November and the month of no of December are both typically strong months.

December, we typically have they call it the Christmas rally, Santa rally. So, December are typically good months in the overall market. And I'm hopeful that that'll be the case this year. Of course, you know, past performance doesn't guarantee future performance. So, we see trends in the market, but we ultimately don't know. So, what I can control is how much I'm willing to risk and how often I show up. I'm going to show up every day.

And for right now, I'm going to keep my risk tuned down a little bit. So, if we continue to see choppiness, I'm not going to be giving back a ton of unnecessary profit, but I'll be able to break the ice, build a cushion, and if we have something that starts to pull away, then I can step up to the plate and and take a little bit more risk. So that's, you know, that's my that's my g personal game plan for um for November, you know, as we're kind of looking forward to the new month.

Um you know, I think of course different traders will approach it differently. I just, by the way, saw um Jack posted this P&L here, which I love seeing. A really fantastic month. Couple red days, but the red days are small. They're manageable. This is a good-look month. Now, even though I made more this month than Jack, his metrics are better than mine. I I have no doubt about it. His average winner, his profit loss ratio is going to be better.

His accuracy is likely going to be better. And so, the difference between me making 30 or 40,000 or whatever it is and him making 10,000 is a function of share size. And if he increased his share size and started to ramp it up, he's not going to go from 10,000 to 40,000 in one month. That would be sizing too quickly. But if he keeps on this pace, he's going to be in a really nice uh spot a few months from now. So, I love seeing uh this type of trading.

Now, you can see, and I think this is very common, look at the day that he's down $900. He took 35 trades. That's the most trades he took on any day. So even there he fell a little victim to I'm sure FOMO, frustration, disappointment. Now grand scheme of things, he wasn't giving back more than he had shown that he could make on, you know, a decent day. $900 to $1,000 have been uh fairly common. But on that day, I I imagine he got a little frustrated and so that was a tough day.

And this day he had 16 trades. And yet the biggest green day, let's see, $1,300, he took only seven trades. H that is interesting, right? So when it's hot and it's just working, it just sometimes feels like it's easy. Uh you know, it's all relative, but it feels like it's easy. And then on days where you're struggling, sometimes we ask ourselves, why am I fighting so hard when the market is so difficult? You know, and and that's just our human nature.

And on the other hand, when the market's really hot, it's also our human nature. Take that profit off the table and walk away. And perhaps if there was ever a day to take 35 trades, it was the day that the market was going well in his favor. So, something to think about uh for Jack, but of course for you guys as well as you're looking at your P&L and analyzing the month of October. Um you know, as I said, October for me.

Um not not anything that I'm particularly um you know, proud of or pleased with. It was a disappointing month, but I'm grateful that I finished in the green and I'm glad to put the month behind me and start a new month on Monday. So, thank you guys as always for tuning in. If you haven't already subscribed to the channel, I hope you hit that subscribe button. I'm going to put links to a couple recent uploads that have been really popular right here that you guys can watch over the weekend.

And I'll be back at it live streaming 7 a.m. on Monday morning.