Samwise Quick Reference Handbook
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The sentiment around Tesla is so weird.
Back in October 2024 when Tesla was traded around 213-220 (lower than the bottom of this correction so far), you can find people talking negatively about Tesla but not to the extent of last week’s news feed. Yet, Tesla still traded higher last week with a much deeper negative sentiment than the those last few weeks of October 2024.
Tesla is very resilient.
Since you mentioned possibly never seeing TSLA below 200, though for different reasons, would you consider the current sentiment to be over-reactive similar to NVDA and DeepSeek?
Yes. But not only that, this should highlight an important lesson for stocks. Stocks start trading higher lonnnnnnnnng before the sentiment shifts. Everything thinks the sentiment and news cycle must shift first.
That is NEVER how it has worked in the stock market. Ever. The market starts rally, the financial press starts to look for reasons and then states those reasons like it’s gospel. I know people in the press really well. They’ll full of shit. Well I shouldn’t say that. They are well informed people. But they’re not gods who have ALL of the information and reasons for why stocks are going higher. They don’t know. They just look for any reason or any piece of information that might be viewed positively and then they tie that to stocks moving higher.
But that’s not what’s going on at all.
For example, yesterday’s really was pegged to Trump claiming that he might be selective on retaliatory tariffs. Says who exactly? Who out there can say they know what literally MILLIONS of market participants are doing with their portfolios and why….
We had been silent on Tesla for at least a week or so and yet on Friday we knew a breakout was coming. For the QQQ, we knew a breakout was coming. We didn’t have forward knowledge.
The QQQ has been rallying for 9-days now bottoming literally only a few days after reaching a 30-RSI. Isn’t that peculiar that it should time out that perfectly?
Hey Sam, what is your reasoning to reduce the 525/535 May spread and not the 540/550 May spread?
Not quite enough value in it and not enough upside. Suppose we do pull-back, we won’t gain any major advantage there.
But suppose instead of pulling back, we rally. Like suppose the QQQ follows the historical trend and runs to $510-$511 for example. The May $540-$550’s would go up massively in that move up. So that’s the reasoning.
The risk-reward for trading out isn’t quite the same.
Note that the $525-$535 would also go up massively if the QQQ rallied to $510-$511. So it’s a risk to reduce by 1/3.
Sam,
Volume on the QQQ’s yesterday was the lowest since Feb. 26. Does that hurt our chances of yesterday being a breakaway gap, and increases the chance of backtesting the lows?
So yes and no. Historically over very long periods of time going back decades, that has been the textbook definition. When breakouts happening, it should happen on volume.
but if you look at recent history, going back 15-years, that hasn’t been the case at all. We’ve seen plenty of cases where the breakout is on heavy volume compared to regular trading but well below the volume of the correction and more immediate trading sessions — and yet stocks continued higher. We’ve also seen long periods of low volume melt-ups in the market where market participants swore that the entire market was going to crash as the entire multi-year rally was happening on little to no volume. But it didn’t seem to matter as we had a normal correction and moved higher.
Take a long look of the QQQ and you’ll find a lot of cases that are just like this one. Where we get a breakout run on lower relative volume (relative to the correction) but high volume for regular non-correction days and that’s generally enough.
But I do think it increase the probability that the QQQ sustains a second leg lower. You want to see high volume to start a new rally. See for example, what happened in July -August. The original post-August rally that took the QQQ up 15% in 3-weeks was done on relatively low volume. But the September bottom that kicked off a multi-month intermediate-term rally was done on high volume.
It will take too long to do that mid-trade. But if you look at the portfolio, we list every trade made including the P/Ls for the trade. Just click on the portfolios and it should show you a list of all past trades numbered.
Take a look here:
https://sam-weiss.com/samwise/samwise-portfolio/baratheon-portfolio/
Now click on completed trades. This is trade #17 for Baratheon where we bought and close out the position.
Given the choice to sell TSLA today, what are you thoughts on considering put spreads?
The arguments don’t apply. Look at the arguments carefully and consider how put-spread would figure into the equation. It just doesn’t work the same way.
Tesla is down 55%. it can very easily run to $400 in 2 weeks time. No problem. Like it can just do what it did yesterday every day for 4-5 days.
The risk asymmetrical. yeah, it’s overbought. And yes that increases the odds of it pulling back. if it runs, and we’re on the sidelines, then we lose nothing but opportunity cost. But if it runs and we’re holding puts, then it’s worse.
We may consider hedging the Julys maybe instead of selling the Julys maybe closer to $300. But there’s a true asymmetrical risk for every long-short trade.
The market is almost always at a much much higher risk of moving higher than moving lower. Overall in the grand scheme of things, the risk is almost always to the upside.
The gut reaction of wanting to buy puts or put-spreads to make up for the trade by trying to capitalize on the pull-back is natural reaction but also one of hte more dangerous ones.
Consider the overall circumstances right now. The QQQ has only rebounded 6%. It’s the THRID smallest rebound out of 49 cases. It still has a big ways to go higher. And if it does continue higher toward the median case, what do you think Telsa is going to do?
So those are the big risks. It’s why we’d rather play it by layering in and out rather than buying puts on Tesla.
But if we get to deeply overbought at $300 and if the QQQ is trading at $500, our perspective ight change on that a little. Probably more toward a strangle than going straight short.
Even with the qqq retracement, NVDA is still very weak. The bleed is real
Wonder what happened with that sudden drop to $490
I think NVDA may have killed our bounce..