Samwise Quick Reference Handbook
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SPY is over 85RSI on the hourly chart!
Would this price action be assisted by the holiday and potential lack of traders for today? If institutions are rebalancing, that would make sense for retail or average traders to take the price higher while we’re at ATHs. It almost seems like inverted capitulation haha.
Honestly, the April 3rd crash went from thursday to the weekend and then reversed on the monday the 7th…Curious if this could be a similar coincidence, especially with being overbought again.
You’re touching on something important here. We are at a critical risk point at the moment when it comes to peaks/troughs in the market. The market loves to top and bottom in the 10-days between the 25th of the month and the 5th of the ensuing month.
We discussed this back in April at the bottom. The beginning of a new month poses a lot of risks to the rally (or to the correction for the bears).
We’re still very much in that period. Holiday trading does have an impact. But it wouldn’t be this large of an impact.
This is all normal still. $560 on the QQQ makes a ton of sense. It just got there a lot earlier than I would have expected. But that’s exactly how the market often operates. It does some unexpected things.
But I do think we are nearing a high point. The SPY is nearly at a peak for sure. And that’s going to put pressure on the NASDAQ.
If I had to guess, we peak at $560 on the NASDAQ and $630 on the SPY and then promptly see a big pull-back. From there, we may then retest the highs later and consequently form a full top ahead of a correction or blow past toward new highs. Then we re-examine again at the end of July going into August.
We won’t know until we get the pull-back and subsequent retest.
Hi Sam,
So, NVDA pulled back for a total of $7. This is pretty minor on the spectrum of pullback sizes we’e seen in NVDA. You’ve mentioned NVDA tends to sharply pullback upon deeply overbought instead of going through a drawn out negative divergence cycle like the QQQ. Does this recent uptick in NVDA count as something “new” or are we still in the same negative divergence cycle and the pullback we’re expecting is yet to happen?
Thanks!
So a little of both. Nvidia can peak right off of deeply overbought and often does. But it can ALSO go through a negative divergence cycle. They’re not mutually exclusive or anything like that.
Also, the market is at an imminent peak. Once the market pulls back, it will put heavy pressure on Nvidia regardless of where it is.
Finally, at $160, Nvidia is reaching expensive levels. Not overvalued. But expensive. From a long-term perspective, an investor loses nothing (except for long-term capital gains which can be addressed through strategy) by selling at $160.
Like I know that right now, with a very high degree of confidence that I can buy Nvidia at a price below $160 sometime in the next 2-months. And with a near certainty, at some point over the next 6-months.
But as we’ve seen, the NVLD will be substantially lower than it is right now if Nvidia is sitting at $160 3/4/5/6 months down the line.
So from that point of view, there is very very little risk in closing out Nvidia at $160 a share for those how have the discipline to not be caught up in FOMO-based emotions.
For a disciplined investor, closing out Nvidia at $160 is a low opportunity risk endeavor.
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Here’s another way to think about this. If go back and look at Nvidia over the past year or so. There is always a point where everyone should intuitive grasp the concept that the stock, while not overvalued, is on the expensive side of the spectrum.
That was anyway north of $140 over the past year right? If you go back to last summer, anyone who close out Nvidia at or above $140 always had an opportunity to buy it back substantially cheaper than where they sold it.
Anytime the stock has run 80-90% liek it has, same deal. There will always be an opporutnity in the future to buy it back for a substantially lower price.
Now if I owned Nvidia outright, I wouldn’t close it out because why take the opporutnity risk at all. I’d rather sell covered calls or simply buy hedges. Just in case the very low probability of some major run happening. Timing has its own level of risk involved.
But with the NVDL, we don’t have that luxury due to volatility decay. We have to be cognizant of time related issues to gain that leverage. And so when Nvidia trades on the expensive side of the spectrum, we have to seriously reduce our risk by closing out the NVLD and simply waiting for the correction to buy it back.
When Nvidia does pull-back near-term, we will explore address FOMO risk by purchasing a call or spread to potentially capitalize on the upside as we discussed a while back.
But that will depend on how far Nvidia pulls back and whether there’s any added clarity on the pull-back.
I want to ask about hedging, since we’re at highs again. You mentioned before we should use ~10% of the portfolio for hedges (on any options portfolio). But, how to determine the specific strike price of the put to buy? Like if we were buying a put right now, would we buy the puts with the strike price equal to current price that QQQ is at ($550)? Last time I believe you bought the $500 put for Arryn in February when QQQ was at around $500. Are we buying at-the-money hedges, or how far out-of-the-money to buy?
So we determine the strike price by how much of the gains and capital of the portfolio we want to protect. And we determine how many hypothetical situations we want to hedge out. For example, if we were to buy the June 2026 $400 puts (instead of the $500 puts), well then we’d have to worry about a hypothetical situation where the QQQ fell to $420 in May 2026. In that situation, the June $500 puts would protect us plenty while the June $400’s would do NOTHING at all for us. That’s one hypothetical we couldn’t hedge out with the June $400 puts alone.
When picking a strike, the closer to the money that strike is, the more hypothetical situations it covers. The further out of the money, the less we pay, but then we get a lower level of protection in situations where the QQQ doesn’t absolutely collapse.
The flip side is this. The further out of the money you go, the MORE protection you get in a total all out collapse. The June 2026 $400 puts WILL perform significantly better in a situation where the QQQ collapses to $300 than will the $500 puts. They’d go up by a larger percentage basis on that 100-point drop between $400 and $300 a share than will the $500’s between $500 and $300 a share.
However, the $400 puts only really protect us well in a full collapse. In a marginal crash like we saw in April, the closer to the money options like the $500 puts would perform far better. Especially if it happens later in the game.
For example, if we pay $20.00 (right now) for the June $500 puts, it means our portoflio is effectively protected on a 1-to-1 ratio below $480 a share on the QQQ no matter WHEN that crash occurs. If we buy the June $400’s at $7.00 today, then we get BETTER protection on a crash to $300 (ANTIME) and less protection on a pull-back to only $400-$4500 later down the line. Less even if it happens NOW.
For every $1.00 the QQQ drops under $480 a share, we gain $1.00 on the $500 puts WITH CERTAINTY. That’s not to mention the premium. We paid $20.00 for the $500’s so it’s $500 – $20 = absolute protection under $480 a share. With the $400 puts, we only get protection between $450-$400 if it happens immediately and we get absolute protection with more intensity on any drop under $400.
This is true at any strike range between $400 and $550.
You can only really start to understand this stuff if you run the math. The hints I can give are thus. When buying a hedge, shoot for 10-14 month out into the future. The hedge should be 10-12%. For example, June 2026 puts expire in 11-months.
Then you have to run the math to get an understanding of which strikes. Doing the math is precisely what lead an investor toward being able to make these decision intuitively without running the math. I do this all very seamlessly and without having to reference in math at all in most cases.
KEY POINT: There is no hard and fast rule here for picking a strike. You have to either (a) use experience & intuition or (B) draw out various hypotheticals. Like so:
What happens if the QQQ falls 12%, 16%, 20%, 25%, 30%, 40%, 50%, 100% over the next 3-months? What happens to my long positons? What happens to my puts? If I buy the June 2026 $550, $500, $450 or $400 puts, what are they valued at under each of the circumstances above.
What happens if the QQQ falls 12%, 16%, 20%, 25%, 30%, 40%, 50% or 100% over the next 6-months, > continue the math.
What happens over the next 9-months, 12-months etc.
If you do the math on this, you’ll begin to get a sense of which strikes to pick.
You need to determine the value of each call option position you own at each of the hypotheticals above and then determine the value of your assumed hedge. Then you look at your portfolios value at each of those levels. Then you compare results. While this might take time to outline, that’s the due diligence required for successful investing.
So how do we predict the values of our positions in the future? Simple, here’s a nice easy way to do this. A very straight forward mythology for predicting option values:
(1) you can get an option calculator and input the values (calendar days until expiration + projected price of the QQQ);
https://www.barchart.com/options/options-calculator
AND/or (2) check the option tables for all expirations to extrapolate what your option will be worth down the line at different price levels the QQQ.
For example, right now the QQQ is at $556.22 correct? That is as of July 3, 2025. So if we want to predict what our June 2027 $400 calls would be worth with the QQQ at $500 a share 5-months from now, one quick and easy way to do that is to simply look at the January 2027 calls. Why? Because the values of the January 2027 call options TODAY (July 3) are worth roughly the same value as the June 2027 options 5-months from now. They give you window into what your June options would be worth in 5-months into the future.
So then how do we determine what the $400 strike calls specifically worth with the QQQ at $500? Well that’s simple enough. At $500, the June 2027 calls would be exactly $100 in the money correct? So all have you to do is simply look up the January 2027 calls (today) that are exactly $100 in the money. In this case, that would be the January 2027 $455 calls.
If we want to know what the June 2027 $400 calls would be worth 5-months from now with the QQQ at $500 a share, then we need to look at what a January 2027 call option that is $100 in the money is worth today. Those two things are pretty much equal.
And the January 2027 $455 calls ($100 in the money) are trading at $143.00 per contract as of July 3. That tells you that our June 2027 $400 calls ($100 in the money) would likely be worth around $143 if the QQQ fell $55-$56 from here 5-months from now.
We can then add or subtract a few points of premium depending on time. We can ballpark it. For example, if what if the QQQ were at $500 a share 6-7 months from now (rather than 5-months for now). I’d subtract about $5-7 from the Jan 2027 $455 calls and estimate that they’d be worth closer to $133-$135 a contact.
You can then confirm the estimate by simply running a calculation using an options calculator. I generally just skip this because it’s all estimates anyways and it generally confirms my estimate.
But as of right now, the June 2027 $400 calls have 714 calendar days until expiration. We want to know what they’re worth 7-months into the future and at $500 a share, we simply subtract 7 x 30 =210 calendar days from the input. So it’s now 504 days until expiration and underlying price at $500. Guess what? The theoretical price hit right on the money. It estimates at $135 as I estimated above. I just straight guessed it exactly on the dot. $135.35 is what the option calculator determined. And that’s without considering increased volatility from a correction. It could be worth $137 with high volatility (see attached options calculation)
Anyway, the point here its this. I don’t even bother with the option calculator. I simply just open up the options calendar and extrapolate using the method above. IN some situations, I use the options calculator.
I hope this makes sense because this is exactly how to begin understanding what strikes to pick. And it does became highly intuitive. You can quickly hedge out a bunch of scenarios by picking correction distance strikes. I’ve learned over time to just hedge out as many scenarios as I can by simply buying a put that is 40-50 out of the money (8-10%) and to the nearest century mark. So in April on the rebound from $400 to $470, I bought the March $400 puts giving me 11-months of expiration coverage and absolute protection for any price level below $400. If the QQQ crashed in a dot-com style collapse of 80%, well then I’d have FULL coverage from $400 to $100 a contract.
In this case, we were near our highs at $540-$550, I choose to pick up the June 2026 $500 puts. That gives me coverage for an entire year and I get 1-to-1 protection for every price level under $500.
Now you can do this same exact math with every other option. The closer to the money you buy it up, the more certainty you have in coverage and the fewer hypotheticals you have to worry about.
For example, let’s suppose we didn’t buy those June $500 puts yet and that we were thinking bout picking a brand new hedge today. Here’s a list of different puts for the June 2026 expiration. Why June 2026? It’s roughly 1-year worth of protection which requires little in terms of maintenance and active management etc.
$400 puts = $7.00
$450 puts = $12.15
$500 puts = $20.80
$550 puts = $35.00
$600 puts = $58.00
So you just run the math on all of these and then consider what your positions would be worth at different levels of sell-offs. There are two things to always keep in mind when buying hedges. First, we want to protect with around 10-12% and ideally we have AT LEAST the same number of put contracts as long call contracts.
Anything more than 10-12%, and you eat away at your profits. Anything else, and you get less protection.
So for example, in Arryn, we own
(1) QQQ Dec 2026 $430 calls at $75.00 x 4 contracts;
(2) June 2027 $400 calls @ $85.00 x 4 contracts.
That means we need to protect 8 contracts.
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I’ll soon be publishing a stress test for the leaps portfolios. What we do is estimate what our different assets we’re holding would be worth under different hypothetical to determine whether our hedges will protect us.
That’s the only way to really understand what strikes to pick. You have to do the math a few times to understand the underlying basis for picking strikes.
So, when you’re doing the math to see pricing of options in the future you don’t really account for any changes in volatility? The volatility is going to be elevated during a correction so it sounds like when you run calculations for hedges you’re running a worst case calculation as the value of hedges will invariably be higher with the increased volatility.
Yes. That’s right. I view the increase in volatility as the “icing on the cake,” as it were.
If it works without increases in volatility, then it’s obviously going to do its job and even better with volatility skyrocketing.
Hi Sam,
Now that the QQQ has entered the realm of $555 – $560 I’m curious if you have any thoughts on if this signals to the market that $560 is inevitable. I’m taking reference to something you mentioned in one of my previous comments (https://sam-weiss.com/near-term-pull-back-is-over-intermediate-rally-may-continue-after-retest/#comment-4291):
Does this type of psychology apply on a smaller scale here? The extrapolation here being $5 – $6 within increments of 10s vs. $50-60 within increments of 100s.
Thanks!
Yeah with the QQQ reaching $557, it is more likely to peak closer to $559-$561 than it is where it peaked on Friday. But there are plenty of instances of the market peaking just under that level.
For example, we saw the QQQ peak at $388 a share during the first rally of the bull market. That the same quarter where Nvidia had its massive blowout earnings and when the stock went parabolic.
The QQQ peaked at $388. It didn’t push past $390 a share. But it also reversed hard for of that $388 level and then went into a full correction.
While it’s more likely to actually push past that $390 level, it’s not certain. It’s in the more likely category i.e. QQQ peaking ahead of a correction at $540 highs rather than at $537 highs.
We’re more likely to get a peak at $560 area.
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The smaller time and price scales do also operate in much the same way as does the macro scale. The 1-hour chart is a microcosm of the daily chart. You see the same patterns and with the same frequency as you do on the daily.
With NVDA making a new high of 161, do we still expect it to go down to 150 on a pullback? A 8-10 point pullback now would be 153-151
Yeah probably low $150’s. Correction down to the $120’s at this point. Next major correction, I think Nvidia bottoms at $120.
The days of $100 Nvidia are gone I think.
Hi Sam,
What are your thoughts on how the expiration of the 90 day tariff pause next week will impact the market? I know the expiration day has been known since the start so one might say it’s “priced in”, but since we’re at fresh new ATHs I’m not sure if that is the market is signaling that it doesn’t care about whatever happens or something else entirely. This is slightly “news related” and we (now) know the news usually doesn’t mean anything so maybe all of this moot? I wouldn’t be surprised if the sharp pullback happens right after the pause ends and the media associates the pullback with the event haha.
Thanks!
So the market is entering the last 1/3rd section of the rally. At 61-days, we’re already well past the average rally of 52-days.
Notice, if this rally continues to the end of July — even if mostly just consolidation and incremental new highs — the rally goes into the top 10 longest rallies going back to 2010.
That’s 82 sessions. We’ve only seen 7 previous rallies go to 82-sessions or longer.
The point here being the QQQ is due to top at some point in time THIS MONTH. Most likely we’re peaking RIGHT NOW or at the end of July or beginning of August.
If the market starts to sell-off on Tariffs, it’s likely just going through the inevitable. We’re already due for a correction. If it doesn’t, the QQQ will likely sell off near the end of the month anyways.
If the rally goes on until early September, it’s entering record territory. We’ve only seen THREE high volatility rallies extend beyond the 100 day mark. All three had extenuating circumstances.
One of those rallies was the one that occured been September 2024 and February 2025. Rally we had an 8% correction a lot earlier than 111-days. I just included that entire period because it felt more like a complex top ahead of a major correction. The point being that one of the three 100+ day rallies has a huge * to it.
The other 100-day rally was the 114 days covid run with a whole long set of * to it.
Then we had the November 2023 rally which like the September 2024 to February 2025 rally had a VERY LONG consolidation period where it spent a good 25-30 days trading sideways.
The point here is this.
Even if this rally were to extend to beyond the end July, it’s likely to go through a long very heavy volatility period ahead a full correction in September.
The only true exception to the peak under 100-days rally is Covid. That’s the only real rally that extended for 114 days. And even that rally had 7 different 5%+ pull-backs!!
So really, all 100+ day rallies had some weird exception going on.
We’re at 61-days. End of July puts us at 82 days. End of August puts us at 100-days.
MOST likely, it ends in July. With the QQQ rally extending to 39%, there’s a very very distinct possibility that tariffs causes or sparks a correction.
Trump says the wrong shit at the wrong time, and the QQQ will be trading at $500 in the blink of an eye.
Hey Sam, possibly a semantics thing, I am seeking clarification on the point you made here yesterday which you re-iterated similarly today in the comments:
Do you mean the literal ‘Top Date’ such as the column in ‘Table 1.0 NASDAQ-100 (QQQ) Correction Table’? Or do you mean the process of topping (which would make more sense) before the actual ‘Top Date’?
When looking at your table, the literal ‘Top Date’ only appears 37.5% of the time within the turn of a month (last 5-days of a month and the first 5-days of the ensuing month), and so the ‘Top Date’ based on that table is more likely to happen in the middle of a month.
Same goes with column ‘Bottom Date’ within ‘Table 1.0 NASDAQ-100 (QQQ) Correction Table’, where 23 of 48 (~48%) datapoints for the bottom fall within the turn of the month.
So here’s something the top date doesn’t really tell you. Let’s suppose we get to July 16 and the QQQ peaks at $571.13 a share. It then pulls back to $563 and rebounds back up to $570.89 on July 29. It then sustains a full blown correction on those final days of the month and going into the month of August.
While the absolute peak price sits at $571.13 in the middle of the month, we often get an actual sell-off during the close of the month.
It doesn’t always happen that way, but definitely often enough.
If you go back to each of those dates and examine what happened, you’ll often see a complex top like that which then leads to a sell-off near the ends/beginnings of months.
For example, if you go back to July 2023. We had a peak on July 19, 2023 of $383.16. The QQQ pulled back 3.5% and then rebounded to retest the highs reaching a peak of $380.09 on July 28, 2023. It fell short the highs and then sustain a hard correction right at the start of August. We were sitting within 0.79% of the highs as we ended the month of July even though the actual peak was July 19. It spent a full 9 days going through the 3.5% pull-back and retest cycle before ultimately rolling over into a correction to start August.
In the February 19, 2025, correction, we didn’t start to see selling pressure until the final 5-6 days of the month. We sat right near the highs on February 21 when the market reversed course and started to sell-off. The sell-off started in earnest on February, February 21 and during the final week of February (next week).
On February 21, 2025, the QQQ opened the day at $537 a share. That’s a mere $2.40 (0.45%) below its all-time highs and most of the selling happened at the end of that day.
The next week — February’s last week of the month — is where all the heavy selling started. It’s where the full blown correction basically took off.
You se a lot of very similar corrections in teh past that take that sort of shape. The top date we have listed is just the very day of where the highs occured. But that can easily happen 5-10 days before we get any actual sell-off.
If we set an actual “sell-off” or correction start date, you’d have several more cases closer to the typical end & start of the month window.
Also, it’s not hard and fast rule. That 10-day window can easily extend to 11-days. There’s not a meaningful difference between day 10 and day 11 right? So then you’ll have a lot of those marginal cases too. Just like this past February.
Technically speaking, the QQQ sell-off of this past correction really begin in teh middle of hte day on February 21. That’s 6-trading days before the end of the month. If that selling begin on Monday, it would be squarely within the 10-day window. Happening in the middle of the day on Friday, February 21, we now have a marginal case where the sell-off happened hours shy of the 10-day window.
But we’re not really trying a case here in court or anything liek that. It’s still very much actionable if sell-off begins 4-6 hours outside the typical 10-day window. I still consider it an end of hte month case right?
The entire point of the window is to point out that the market undergoes a topping risk and bottoming risk as it enters the beginnings and ends of the month.
April 7th occured on the 5th reading day of the month. But that whole indicator of top/bottom in the last and first 5 days doesn’t fundamentally change if the QQQ bottomed on April 8th or 9th even and days 6-7. You’re still basically within that window or shades of risk. Maybe less so as we near the middle of the month.
I think a better way to look at this would be to identify the actual date and time where the sell-off started in earnest. At what point in time did the market begin to roll over hard. That is the actual TOP date.
There’s always a date and time for that. You can always identify when things have really shifted.
Even when it comes to bottom dates, it’s the same sort of thing going on here. The bottom date doesn’t always actual mean the end of a correction. Though bottom dates are more likely to represent an end due to capitulation than are top dates for end of the rally.
Still, I think to get a more accurate picture, you have to go back to each of those dates and mark the actual beginnings and ends of corrections.
You’ll find that the end/beginnings of the month pose a risk to the market for tops and bottoms alike.
To determine whether there is an increased risk at all, you want to look at that window 10 days (which generally represents 33% of the days of any months) and determine whether corrections occur more often than 33% of the time during that window. Then you also have to consider the shadings around those periods (like the February correction for example).
Sam, I really appreciate you taking the time to answer back with a detailed reply over the weekend in which many people would consider working during their free time. Every time someone asks a question here, reading your reply is always like getting a mini article/briefing.
Following up to your reply:
During the 10 day window, weekends and holidays don’t count yeah? I already thought about that 33% before, but you really want to be consistent here. There are 30 days in a month, and yeah 10 days divided by 30 days is 33%, but we don’t trade during weekends and holidays observed on the NYSE, which means this gives us around 20-21 trade days a month, so those 10 days actually represent 50% of the month and not 33%. Looking at purely the occurrences of top dates which happen 37.5% of the time around the beginning or end of the month is not great since 50% of those 20-21 trade days are taken up by a 10 day span.
Yeah so I previously already looked at that as well. If even if you were to consider going just slightly higher than 10 trade days (i.e. 12-day window), this lands us only a bit under 50% where top dates happen. Again, this is looking at it from a standpoint of 20-21 trade days a month, so in this case when that window takes up more than half the trade month and the chance of a top landing in that window does not confidently surpass a 50%, that’s not that great. Jokingly, might as well let the window consume all the trade days at this point.
I think a point you are trying to convey is simply risk, considering there are particular scenarios that may develop prior and after the newest peak date. Understandable.
But anyway, you clarified what I was looking for in your reply here and I appreciate the clarity: “The entire point of the window is to point out that the market undergoes a topping risk and bottoming risk as it enters the beginnings and ends of the month.”.
I think this is the main thing here. I haven’t done an analysis that centers on this very specific issue. If I did, what I’d be looking for is the exact date where roll over occurs.
Top, pull-back, retest and then crash. That crash date is the key date. The whole analysis would be important as it informs different courses of action.
If I ran an analysis on this issue I’d want to parse out those instances where the market hard tops — days where it reaches a peak and IMMEDIATELY begins to sell-off. Covid happened that way as did July 2024 to some extent.
July 2023, as I pointed out above, is the standard topping process case. Hard pull-back, retest and then crash. But there are plenty of hard tops as well.
So I’d look at that and differentiate. Even try and determine what conditions lead to one or the other.
Tops really happen in one of three ways. First, we could see a long consolidation top. That occurred in both March 2023 and in Dec 2024 – Feb 2025. If you remember the period leading up to the Feb 2025 crash, we were basically trading sideways. there was heavy volatility. But it was largely a sideways market trading between $500 and $540 a share.
In March 2024, we had prolonged period of time where the QQQ traded between $425 and $446 before ultimately sustaining a correction. I think the QQQ spent a month oscillating between $425 and $446 a share.
Then you have July 2023 type tops where we get a near-term top after a long run, a standard 3.5% segmented rally pull-back and finally a re-test of the highs that either (1) falls short; (2) matches the previous highs or (3) only results in incremental new highs. All three lead to the same outcome. Correction. In July, we had a. high that feel less than half a percent short of the highs. From there we went right into a correction.
Bottoms often only occur in 1 of 2 ways. Hard bullish hammer and v-shaped recovery like we saw in April. Or a major bottom, rebound sand retest. Which we kind of also went through a well back in April. But generally speaking, the market doesn’t rebound 15% and then retest. If we go through a retest, it’s affer a 3-4% rebound or something.
There was one correction back in February-March 2008 where there was a consolidation bottom. That is extreme4ly rare. And the only time I remember it ever happening was back in Feb-March 2008. Every other bottom I remember was a hard bottom.
We did have a prolonged double-bottom in July – August 2010 as well. But a gain, in most cases, either (1) hard bullish hammer; or (2) bottom, oversold bounce, retest and rally.
Anyway, the tops analysis is very different than a bottoms analysis. And I think for tops, we’d want to look at the issues outlined above:
(1) Hard top, Retest or Consideration top
(2) Top date
(3) Correction date
(4) Topping Process trading days
(5) Topping Process Calendar days
^This would probably give us better information on how seasonality during the month impacts tops in the market.
We want to look at how that period between the end of one month and beginning of another impacts correction risk. Let me show you a cursory look at 2018 to 2023. I just pulled up a quick period I don’t often look at on a day to day basis. I’m often looking at hte 2023 to 2025 period. but here’s what the weekly chart shows. It’s imprecise, but what it’s showing is the “week of xyz date” as the correction date. Red lines are dates occurring closer to the middle of the month whereas black lines/dates are lines occurring near the beginnings/ends of the month.
Tesla never recovered to its ATH in the 400s, do you see this as unlikely to happen again in the intermediate term? In a correction Tesla would get hammered into the 200s, I would imagine? You had mentioned before it goes through these long cycles of rallying and selling off, do they ever run out of sync with the general
market direction?
Tesla is probably going to take a while to get back into sync with the market in terms of recovering to its all-time highs due to the fact that (1) the stock ran way ahead of itself. Remember all of the gains up to the $400’s occurred as a result of the election. Tesla was trading in the $200’s back in September or October leading into the election. It then went completely parabolic into a crash. So failing to recover all the way back to the highs with the market makes some bit of sense. Especially given the political turmoil surround Elon Musk and the stock; (2) the distance needed to travel is extreme.
Separately, Tesla can go years without returning to its actual highs. In fact, if you look at Tesla stock long-term, it can easily trade between $200 at the low end and $400 at the high end for several years and then breakout to $700. That’s very consistent with what we’ve seen out of the stock for over a decade. Tesla first reached the $400’s in 2021 in the post covid rally, crashed to $100 a share in the 2022 bear market and then recovered to peak of only $300 in the 2023 recovery. It wasn’t until the election the stock returned to its highs and made new high all-time highs. Tesla is more of a broad trading stock or even a long-term investment with defined buy and sell points. Buying it when it’s’ down 30-50% from its highs and selling it on a 30-50% rally. That’s probably the best way to approach the Tesla trade.
While a correction might hammer the stock, it is likely to enter a bullish phase on its own when it’s ready. Basically as we saw going into the election.
Also, not every correction is going to cause the stock to completely crash. In fact, I most corrections, it does take a beating, but it’s not like a 30-50% decline every time the market has a correction. what we saw back February was on the more rare side. It does happen. We’ve seen plenty of 40-50% declines in Tesla. But it’s the rare exception.
And the stock is sort of ahead of the market right now on the downside. So it’s likely to see less selling in the upcoming correction than it might otherwise have.
Same as Apple. Apple never returned to its highs. Not even close. It has barely recovered off of its lows. Thus, it’s probably going to see a substantially smaller correction than it otherwise would had it returned to its highs. There are less built-in profits in the stock. It market easily market perform the correction. Meaning, while Apple generally falls 1.8-1 versus the QQQ, it might now only fall 1-1 with the QQQs instead.
Tesla didn’t quite reach deeply oversold on this pull-back just yet. But if it does, we’ll get long. I’ve been watching it. It reached mildly oversold conditions this morning.