We have a +100% Leading Gainer! transcript

What's up everyone? All right, in today's episode, I'm going to break down the leading gainers in the market this morning. I'm going to walk you through the setups that I was looking at, and I'm going to give you my outlook for the rest of the day. Before I do that, let's take a look back at yesterday. Yesterday was a red day recap for me, max loss. Friday was also a red day recap. So, in those two days, I was down 10,000 rounding up on Friday.

I was down 30,000 yesterday. So, I'm in a $40,000 draw down here in 2 days, which seems like a big number. It sounds like a big number. You could buy a lot of used Subarus with that kind of money. I'm aware of it. But at the same time, it's important to maintain perspective. And I've had far deeper drawdowns this year, much bigger losses. And I I kind of think about it like this. A drawdown is is a symptom of something happening.

There's one of two scenarios. One is the market is shifted and so you're suffering losses because the strategy which is your go-to strategy is not performing as well in the current market. That's external. So there's an external variable which is the condition of the overall market and it is shifted and now your go-to strategy is not performing as well as it used to. That's the first scenario. The second scenario is an internal variable which is that the market is fine but I'm no longer centered.

I'm emotional. I'm giving into FOMO. I'm buying the top of moves. I'm selling on the bottom of candle wicks and I'm just not in the zone. And the market could be extremely strong, but I'm screwing up and I'm losing money. Unfortunately, sometimes both can happen at the same time. And I would say that's what's happened in this latest draw down for me. Yes, the market has cooled off. Friday was cold. I came in on Monday.

Monday was cold. But I also became emotionally compromised as I began to lose and I started getting stubborn and I started trading with bigger share size as I went deeper into the red. And so, as you can imagine, if you're starting to lose and you double down, then you're going to start to lose more and more and more. What you should be doing when you start to lose instead is you have that first loss and it's like, "Hello, wakeup call.

This is a signal. The market's that something's wrong." either the internal variable or the external. So reduce size. Now with smaller size, you lose a little bit less. The warning sign gets even bigger because now you have a second loss in a row. And maybe at that point, you would take another trade and you say, "All right, you know, three strikes, I'm out of here. I'm done. I'm not going to overstay my welcome." And I could have walked away with probably a third of the amount of loss I suffered yesterday if I'd had the presence of mind to do that.

But variable number one, the market was not on our side yesterday. Variable number two, my emotions, me was also not on my side because in this moment here I immediately became frustrated, right? Frustrated, angry. And so rather than reduce size, I increase size. So loss number two is bigger than loss number one. Loss number three was bigger than loss number two and number one. And so that's how I got myself into this minus $30,000 drawd down from yesterday. and now minus uh plus the the 10 uh from Friday.

So now I'm at minus $40,000. Disappointing. There's no question about it. And so when I sat down this morning, I said to myself, look, clearly there's an external variable, which is the market. The market has cooled off. The writing was on the wall. I could see that through August that it was cooling off. I pushed too hard in September. It didn't pay off. And so, you know, there I there's no excuse, but better late than never.

Take your foot off the gas now. So, I said, "The market's cooled off. That means I have to focus more on trading dips off of support, entries closer to support, and being more cautious buying at the breakouts during a hot market. I obviously buy at breakouts and do very well, but that is really a hot market strategy, whereas trading dips off support is more of a cold market strategy. You could trade dips during a hot market, too.

I mean, there's no reason you can't. And in fact, I do, but during a hot during a colder market, you really don't want to trade the breakouts as much because you'll see too many false breakouts where you get that quick pop up. And I'll show you what it looks like. So, this is the false breakout. You get one candle up, you get another candle. Typically what you end up seeing is that as the price is going higher the volume is declining.

So the trend is exhausting and then you get a pullback here and it's a sharp pullback. It's typically on higher volume. Shorts are eager to jump in. You get another drop here also on high volume and then you think I'm going to get in here for the first one minute candle to make a new high. That's what I want to see. You jump in. The candle pops up as traders, you know, like you are jumping in and then you get this sweep of selling and the price drops down and you end up having a dramatic false breakout on even higher volume.

This is very typical of cold markets. And the clue, the hint that this might happen is in the volume profile right here of declining volume on the up ramp and then high volume on the selling. And certainly if you see the presence of the the candles getting smaller and smaller, the trend's getting exhausted and sometimes you'll see a big topping tail like that which only shows us that the sellers pushed it down that much faster.

So in a colder market, you got to be a little bit more careful trying to buy those breakouts and instead let the stock fail. Let it let it sell off and then if it starts to base out down here, then this starts to become a level of support for a potential curl back up. But I'll tell you, it's hard to trust the curl back up when you've got a topping tail here and a topping tail here. So the entry is down here once support is established.

This is support. So I'm in with a 105 cent stop. My profit target realistically is take profit up here for a double top or take profit up here for the double top at this level. And I'm not expecting that I should add here for a big squeeze through a new high a day because that's hot market stuff and we're not in a hot market right now. All right. So, here's the P&L for today, the big reveal. Zero. I made zero, which means I'm still in the draw down from yesterday and Friday.

I made no progress on recovering it, but I also didn't make it worse. If we look at the scans today, our leading gap is up 94% right now. BKYI, I didn't trade this. It is an inverted head and shoulders pattern. I did mention this uh was taking place here. You've got the descending resistance line which I connected at this line and this line here. And so this had resistance then becomes support then bases off this level and goes from 3 up to 335.

You're talking about 30 cents a share. Now here's the reality. If you get a 30 c move, you never capture the entire move. I mean it's just not realistic. Even if you got down here off of support, you know, around 290, would you magically sell the whole thing at the top of that candle? No, you never do. You either hold a little too long and you sell as it comes back down or you sell a little too soon as you sell into strength.

I'd probably be selling too soon in this kind of market. So on a 30 c move, maybe with a little slippage on the entry and a little slippage on the exit, you capture about half of it, 15 cents a share. That's probably best case scenario. And your risk on the trade was probably also 10 15 cents. Probably wouldn't have taken the full 15cent loss, but you never know. So unfortunately, it's not a setup that I would have had a lot of conviction in because of the topping tails, because of the descending resistance.

Yes, it's kind of support, but it's also going above and below it here. And so I just didn't feel like it was really worth it. I also know that generally these lower price stocks can be pretty risky for me and I can end up making mistakes on them. So up here you've got your previous high a day that's at 360. That is that little push right there. And what you'd be looking for on this type of setup is for it to hold that level.

But again, in this kind of market, what we would worry about is the double top rejecting. So you've got BKYI now up 100%. You've got SSTI. This one is a buyout. The company has been bought out at $8 a share. It's trading a little bit above eight. Uh there was uh if you go through the headline, you could see the terms of the buyout. Uh, but typically the way this works is you get the buyout, you get an immediate spike here on 600,000 shares of volume, and if you were really quick, you might have been able to jump in that, but you'd have to be very quick.

And now it's going to trade more or less sideways at $8 a share because that's the value. SLND has 121 million shares of volume today. The price is 89 for me. It's too cheap. SNG, $5 a share, 24 million share float. It's a little higher. Canadian company. Haven't done particularly well in Canadian stocks. MSGY, Hong Kong stock. This is the one that popped up on Friday. Then yesterday it sells off big time from eight down to three, curls back up a little bit.

This is just a bounce off the low. I don't have any interest in that. Kind of reminds me of RTO RET, which put in that incredible move. Now it's at 13 cents a share, but just the other day or uh the a week ago ended up going from.7 up to a high of $20 in two days. That's unbelievable. It's a huge move. And this is something that I think is worth noting. So a lot of traders in this market right now are talking about fundamentals.

They're saying these companies have a shelf registration. These companies have warrants. They're going to do they're they're going to dilute the stock. They're going to sell shares on the market to raise money. the stock is going to go down. Here's the reality of most small cap companies. Most small cap companies have a shelf registration. Most small cap companies are at risk of selling shares on the open market. They're lowerpric stocks.

Many of them have done a series of reverse splits. They've done secondary offerings in the past. This is not unusual. We know their fundamentals aren't great. If the fundamentals were better, they wouldn't be so cheap. This is the reality. And yet what we also know is that the price can become very disconnected from the fundamental value. So if you're focusing purely on fundamental analysis, what would you have done when GameStop squeezed from 5 to 10 to 15 to $20 a share?

You would have shorted it because the fundamentals didn't support it being at 20. And what about when it went to 25 and 30 and 3540, 45 and 50? You would have added more because the fundamentals didn't support at 25. And they certainly don't support at 50 and then it goes to 100 and then 150 200 250 300 350 400 450 $500 a share. The Volkswagen short squeeze was even bigger by the way than GameStop. The Volkswagen short squeeze cost hedge funds over $30 billion in losses.

The price went up to like $1,200 a share. It was unbelievable. Now, the price ended up coming back down. GameStop came back down, but that doesn't mean there wasn't for a period of time a huge disconnect between fundamental value and the price of the stock. And so, what we know about small caps specifically and human behavior, this is just human nature that in the all the history of the markets, you go back to all the markets, there's always been bubbles.

You've got the Dutch tulip bubble. I mean, this is not a new phenomenon that the prices can be very disconnected from fundamental value. And so, these present opportunities if you're trading to the long side to capitalize on this volatility. And if you're going to be stubborn and just trade the opposite or just, you know, be sort of eternally pessimistic and say the fundamentals don't support the price, then you're going to be someone like Michael Bur who is always calling the top. everything is a short.

And meanwhile, since the housing market crash, he of course made a lot of money on the on the bubble. If he had put all that money into the S&P 500 and just let it ride, he'd have far more than he has right now by trying to just call tops, call tops, call tops. So, I'm not a Yeah, look, I mean, if you're a contrarian, it's the way you're kind of wired. That's not the way I'm wired. I personally look for momentum. I look for opportunity.

I look to ride that momentum. uh in the same direction as the trend because I've always found it easier than trying to fight the trend. Fighting the trend is so frustrating. I think sometimes people who fight the trend, they just they love that feeling of finally being right and everyone else being wrong. And that's something you you got to kind of look deep into why that feels. I mean, look, I I don't know, but the the feeling of everyone else was wrong, but I'm right is like a big confidence booster.

And I think that contrarian personality of someone who's just so hardwired to disagree, uh, you know, that's a tough that's a tough personality trait if I'm going to be honest, in my opinion. And being around people that are like that, I don't find it to be particularly enjoyable. So, in this market right now, we are seeing a lot of those contrarians in the in the small cap market. Their voices are louder. They're saying, "All of these stocks are a short.

All of these stocks are companies that are going to do secondary offerings." And you're right, and so was RTO. So was RITO. And in spite of that, even in spite of its fundamentals not being that great, it went from.7 cents a share to 20 bucks. What about Jag X? Jag X is the same. Jag X went from a low of $5 a share to over $60 a share. So, if you really are so focused on the fundamental analysis, you probably shouldn't trade small caps because small caps can be very irrational.

If you want to be a fundamental investor, if you want to buy things based on value or short things based on real value, you probably need to be focusing on much larger companies. you know, your Tesla and Nvidia and Netflix and stuff like that because these small caps, I mean, it goes the other way, too. We can have a small cap that has great news and the price doesn't go up and it doesn't make sense. I don't get it. But you can't be stubborn.

You got to just accept it. So, I focus on trading the technicals. And from a technical perspective this morning, excuse me, there really wasn't anything that looked that great. So, we had BKYI, you know, like I said, wasn't very confident in that. None of these leading gainers gave me any confidence. We had DCAI. This one popped up earlier. Uh uh DC DCIA maybe. What is What is the ticker? Um oh, now I'm forgetting. Well, DIC, that was it.

So, this one, look at this. This pops up, then completely reverses back down. Now, it's rallying back up a little bit. These are scary moves. This is a reminder not to jump in the first thing that's popping up cuz this can really get us into a pickle. So, I'm trying to be patient right now. I'm just waiting for things that really look good. And you know, these are cycles in the market. It's cold right now. We're waiting for the next theme.

But once we get it, once we start to get in the zone, then I'll be able to size up and, you know, be back at it. But for right now, I'm kind of putting myself on the bench. I'm on the sidelines and I'm waiting for the market to improve because if I keep trading right now, I know I'm subject to a higher likelihood of emotional hijacked and that internal variable of getting frustrated and that could result in further losses.

So I have to size down. So if I trade with small size and I lose, the loss is smaller. So it's less emotional. And if I can, you know, recoup some losses with small size, that's great. Uh but on the other hand, if we're not seeing good action, it really is better for me to sit on the sidelines because the downside of trading isn't just the money lost. It's the risk of getting emotionally hijacked again and spiraling and going further and further into the red.

You guys have seen when we have solid action, I have no problem having big green days. We just don't have that action right now. So, I've got to be more patient. I've never been good or as good as I'd wish at taking my foot off the gas when it slows down. That's something that I'm still trying to work on being better at as a trader. But in the meantime, my form of taking my foot off the gas right now is putting myself on the bench.

So, right now, by the way, John is streaming in the small cap room, walking people through the price action on MSGY, walking people through the price action on BKYI. And so just because I'm done for the day doesn't mean the chat room's closed by any means. You can be in the room right now. You can listen to real live market commentary. You can be chatting with other members in the community and continuing of course as always to go through the classes and the curriculum.

So I encourage you guys to check out the twoe trial. Link is pinned at the top of the comments and in the description. So you can use this software, you can be part of the community and see what it's like to be a momentum trader. And I'll say that learning when it's cold is not such a bad thing because it teaches you discipline. With that, I'll remind you as always that trading is risky. My results are not typical and there's no guarantee you'll find success whether you trade with me or you learn on your own.

So please manage your risk and always practice in a simulator before putting real money on the line.