When will the next hot streak begin? transcript

What's up, everyone? All right, in today's episode, I'm going to break down the price action in the market today. Right now, we've got a stock that is squeezing higher, so we've got a little bit of volatility. We've got energy stocks are moving up a little bit. Crude oil crossed over $100 a barrel today, so you know, that's sending some of these small cap energy stocks a little bit higher. And you know, there was a time in the past when uh the price of oil would go up and all these small cap energy stocks would explode.

They'd go up like 200, 300, 400% and that stopped happening. That didn't happen this year. When earlier in the year, oil had this big move up at the beginning of the conflict in Iran, we didn't see a surge in small cap energy stocks, which was surprising. We didn't see a surge in solar stocks, you know, or renewable energy stocks. It just kind of didn't trickle down, which was a bit of a divergence. Typically, you have the price of energy going up and these alternative energy companies also increase or even the local domestic energy companies that are still oil or gas go up.

But that wasn't the case this year. So today, as we saw a few of these energy stocks starting to squeeze, I knew better and I said, "Nah, I'm not going to set my expectations that this is really going to do anything that special." So let's go ahead and jump on the screen share and start breaking it down for today. We'll begin with a look at crude oil. So, um this is um oil futures here on ThinkorSwim, so you could see uh the price of energy rallying back up.

If I switch this um let's see. So, we're on uh 5-minute chart right here. So, I'm going to switch this to the daily. You can see that we had this peak at 119 uh way back here. This is earlier in the year, then we pulled back, we rallied back up, we pulled back. And so, in context, yes, we're coming back up, um but is this a place where, you know, crazy things are happening? No, not really. So, when we had TPET starting to squeeze up, Trio Petroleum, US fossil fuel company, I just sort of knew this could be thickly traded.

Probably not going to work. On the one hand, you look at the chart and you think, well, jeez, it's basically right off the all-time lows. It's a recent reverse split. It's a 4.4 million share float. You know, all of that kind of lends itself to potentially having a bounce. And yet, these energy stocks haven't tended to give us these bounces. If we look at the daily chart, we switch to auto here for the scaling. This is earlier in the year here on T-Pet.

So, we go back a little bit. Let's look at MXC. So, MXC, this is back in 2022 when we had a surge in energy. And this ended up going from about $10 a share to $40 a share. INDO, Indonesian energy. This one ends up doing an even bigger move from $4 to $88. Unbelievable squeeze. You know, and I guess that was just kind of a once I don't know, like what kind of once-in-a-lifetime kind of thing that happened with those stocks.

You could see how energy peaked there on the United States Oil Fund. And arguably is, you know, I mean, not arguably, it is much higher now, but there's that divergence. Whereas energy has gone higher, these stocks have not followed. They've really not been tradeable. So, yeah, so although there's been a couple of different energy stocks that popped up today, SkyQ was another one, SUNE yesterday, Sun Energy. I really I didn't trade them.

I set I had low expectations for it. DBGI hitting the scanner right there. This one tends to pop. It popped up last week from about four to eight and then ended up closing the day red. In fact, yesterday, TNON ends up popping in the premarket session as you probably know from my recap. And then it roll does a double top, rolls over, and ends up closing the day red as well. So, it sells off hard. And the thing that's interesting about TNON is that this company filed a prospectus just uh this week giving them the right to sell 1.8 million shares.

And so, it's kind of funny because on the one hand, they have this news headline that, "Hey, we've repaid a convertible note um of approximately 5.16 million." So, they repaid a convertible note, that's great. And then they're turning around and saying, "But also, we're going to sell more shares to raise money." And so, when I saw those two headlines, um you know, I they kind of cancel each other out. And so, yesterday, yeah, it pops up then it sells off, but then it squeezes back up.

And so, as it's rallying back up here, what I kind of said is, you know, on the one hand, you could say that this is sort of a bottoming tail, and now we're getting like a hammer uh this is like a huge candle sort of on like a hourly chart, where you've got the bottoming tail form there, and that is bullish because although it sold off, we're rallying back up. That's showing strength. And you've got a lot of volume right in here.

On the other hand, given the fact that they are likely going to be selling more shares, that's going to negatively affect the float. Float's going to be increasing, and all of that selling, if it's right on the open market, will suppress the price, and that's going to prevent it from making a move much higher. So, this ends up being basically an inverted head and shoulders pattern um as of right now. It's broken a little bit higher, but I just don't know what's realistic to expect.

So, I didn't, you know, step out and um you know, put my um money on the line on this trade. In fact, as you can see right here, I have no trades in my main account, and I have no trades in my small account today. Um I didn't take any trades today. I just I just wasn't feeling it. TIAN ON leading gainer, but thinly traded, wasn't confident. I sort of felt like the best I'm going to get on this is maybe 10 or 15 cents a share.

And while that is definitely base hit trading, what I've also realized is that I don't usually capture the most of what the potential is. So, if the potential is 20 cents, I typically would probably only capture like half of that at best, which is only 10 cents. So, when I was looking at this and I was thinking the best case is 10, 15, maybe 20 cents, then realistically, I might only get 5 or 10 cents. Now, if I try to do that with, you know, 40 or 50,000 shares, I might get a couple cents of slippage on the entry, a couple cents of slippage on the exit.

So, now 5 cents of slippage on a trade that only had It just doesn't It just doesn't work. And then to take that same trade with 2 or 3,000 shares and make you know, 60 or 90 bucks, kind of doesn't really feel worth it for where I'm at, uh, you know, on the year right now or even just in the last 90 days up 1.5 million. You know, when the market's really hot, you know, these are $100,000 days. These are big green days.

And when it's cold like this, I sort of have a choice where I can either reduce my size significantly and just chip away really small trades, or I sit on the sidelines and I kind of preserve that uh that actual capital, conserve it until, you know, save it for when the market's actually stronger. And also conserve the mental capital. Because, you know, inevitably, sometimes you end up jumping in one of these that never really had that much potential.

You take maybe a little too much size, and then next thing you know, you're down five, seven, eight thousand dollars. And if you remember last week, I ended up going red on, uh, I think it was Tuesday and Wednesday, five grand and then eight thousand. And I was like, you know, that was totally unnecessary. None of those trades really had that much potential, but sure enough, I managed to, you know, take a loss on them.

So, I'm trying to be a little bit better this week about, um, you know, not jumping in stocks like that that really probably don't, uh, that I feel don't have that much potential, because it's just It feels like it's just not worth it. So, uh, yeah, I've traded less this week, but, um, you know, I've got the capital in my account. I'm ready to jump on, uh, jump out there, but I'm just waiting for something that feels a little bit safer.

We also had DFNS that popped up earlier today briefly. Wins a $1.3 million power generation order, but that amount of money is relatively small compared to the size of the company, and so it's not material enough to send the stock up, you know, much more than as you could see here, 5% so it's a bit of a smaller move on that one and you know, so right now we're kind of in the trenches and when it's you know, when it comes to the question of when will this market turn around and what will it look like?

There's a couple different scenarios. One is you got a stock like TNON that just kind of keeps grinding and next thing you know, it's at 550 and then six, 657, 758 and eventually there's capitulation points where shorts give up, they cover, longs give into FOMO and jump in and the thing starts really moving quickly. It you know, just keeps going. That could happen with TNON. I think because the context specifically for this company is that the company's most likely selling shares that will adversely affect its ability to have that kind of squeeze.

But the beginning or or sort of the shift from cold to hot can be one stock giving us just a sort of surprise move. It's grinding, it doesn't drop and then just finally you know, pulls away and shorts give up and longs jump in. Another scenario is you have a stock that legitimately has news that is so good even short sellers are like I better not short this. And so you know, that could be something like you know, a big investor like you know, Elon Musk takes a majority stake in a company.

You know, that's like something like that would be probably quite a a really big headline for a small cap stock. Um maybe Excuse me. Thinking about biotech stocks. Maybe a biotech stock that um has like you know, I don't know, a really good clinical trial result um that that could work um maybe um maybe a company having a partnership with a really big company like an Amazon or an Nvidia or something like that, SpaceX.

Depending on the details of that. But if there was some kind of headline that was so strong that you read it and you're like, this is just clearly a buy, then longs jump in, shorts get nervous, and then that could create a really big move. Okay, so that's another scenario. Um and then the third scenario, I suppose, would be So, the first scenario is a stock just kind of keeps grinding higher then finally pulls away. The second is the if a catalyst is so strong, everyone just jumps in it right away.

Um and I suppose the third would be that you have a stock that is um you know, uh is somehow controlled by insiders. And this can happen with foreign listed securities that the float is so small and insiders own it for pennies on the dollar that they can they really can control the price. And so they start pushing it higher. And as they push it higher, shorts realize there's not a lot of inventory of shares available to borrow, so they really can't short it.

It goes higher higher and higher, and next thing you know, shorts are getting just completely squeezed. And the underlying catalyst may not be clear. It may not even have news. It's a foreign listed security, but it's like, why is this thing going up? And then that starts the next round of momentum where other foreign listed securities are sort of um traders dump on them in hopes that they do something similar. And that's becomes a bit of a self-fulfilling prophecy cuz now they're jumping on stocks and shorts are scared, and then they just start moving more and more.

So, those are kind of three different scenarios of how um the cold market could start to um you know give way to some more opportunities. And sometimes we'll see as it starts to warm up that we'll have some opportunities on one day and then it's totally dead on another day. So, it's kind of like hot cold hot cold you know that type of thing and and so that's not uncommon either. Anyway, so I at this point I'm going to just hold tight and I'll be back at it first thing tomorrow morning.

We'll try to finish off the week Friday with you know hopefully a couple of trades but it wouldn't shock me if we finish the week kind of slowly since you know it's a Friday and I don't expect a big news catalyst to come out on a Friday. So, that means you know probably scenario one and two are out definitely scenario two. Scenario three is a no news situation so that could happen on a Friday and scenario one of a stock that just kind of keeps grinding higher could happen on a Friday except that typically you would expect that there's a catalyst behind the initial move higher and I just don't know that we have a good chance of seeing that.

So, this week may end up being a bit of a wash but you know on the other hand I feel really fortunate because we've had a really good stretch in the last you know well this this year really and certainly the last few months and so if we just have to kind of you know sit tight for a little bit I could do that and then you know jump right back out and be back on the field once we start having some good action again. So, this is an important time to study up so you're prepared for when things start to pick up again.

All right, with that I'll remind you as always that trading is risky and my results aren't typical so please manage your risk take it slow and I'll see you back at it first thing tomorrow morning streaming at 7:00 a.m.