Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
Please login to view this page.
Hi Sam,
What are your thoughts on NVDA’s price action if QQQ ends up going down the route to $600? Are we thinking NVDA will smash up against $200?
Thanks!
It’s possible.
So there are days recently where Nvidia has shown some exhaustion. It’s hard to say. I do think that $200 is a ceiling for Nvidia and I think if Nvidia gets there on this run, it’s going to have an impossible time adding any gains that aren’t bubble-related.
Like $200 is a very high valuation and assumes a ton of revenue and earnings. I think $200 puts Nvidia way way ahead of itself from a valuation point of view. It will crash into the law of large numbers at that point from a revenue and earnings perspective.
I sent this on the app too but it seemed stuck, so apologies if this shows up twice, but with NVDA’s recent exhaustion (and the law of large numbers if it hits 200), do you expect that to affect its correction size? Either smaller or larger? Or do you still expect it to fall 22-23% on an 8% QQQ correction, 25-27% on a 10% QQQ, etc.?
So as a standard, I expect the typical action to play out. Whether Nvidia outperforms or underperforms its typical beta will depend on who bought in and why. It’s hard to predict ahead of time the extent to which Nvidia is likely to outperform or underperform its historical trend.
Nvidia is up 112.31%. That’s the biggest rally we’ve seen in the stock since the Ai rally started. Which is kind of crazy. It shouldn’t go that way.
The previous big runs were:
102% – Nov 2023 to April 2024;
86% – April 2024 to June 2024;
68.6% from Aug 2024 to Nov 2024
Currently run 112.31%
The past rallies did see 50% retracements each. Each pull-back gave up 50% of the returns. In this case, that would put a low at $135. That would be a 26% correction right now.
thank you for the dailys, Sam. I feel like we should just buy calls at this point ????
I bought one apple call spread 240-245 expiring Aug 15 to help me with FOMO????. Not much but the return % would be pretty cool if it worked. Me doing this is definitely a sign we are topping soon though lol.
I personally just loss cut all long term QQQ hedges and rolled over the Sept Nvidia puts to October. This should trigger the pull back on Monday ????
since I have plenty of cash on the sidelines already, I’m gonna keep AAPL as is
There is still quite a bit of time. I don’t think the NVDA puts are toast.
So yeah if the QQQ sustains a correction here shortly, the first place Nvidia goes is the 50-day down near $160. The selling pressure, spike in volatility and distance to the $150 strike at that point would restore a lot of value.
The key is that the correction needs to happen within the next 10ish days. There needs to be a good 1-2 weeks of time remaining as Nvidia pushes down to $160 to exit.
Why the 50-day is the first place it goes? Is that a common thing for stocks to drop to upon corrections? Just trying to understand the significance and technicals 🙂
If you look at past corrections in NVDA, it often pushes toward the 50 day in a hurry.
It’s hard to have a correction without a 50 day test.
Then I’d say 70-80% of all corrections results in a test of the 200 day.
Smaller corrections can avoid the 200 day.
But I don’t think there’s a correction in sight where the 50 day isn’t tested in the market and that is true for Nvidia.
Is this only for NVDA? or would you say this type of behavior (re-test of 50 day on corrections) holds true for most high growth tech stocks? Is there any significance to the number 50 here (i.e. why not 40, 60, 70, etc.)?
In an outlier explosive rally in the past (in this case it would be a rally to 620QQQ for example) have you been tempted or have closed majority longs and maybe only keep say 20-30% invested and have a majority cash position with maybe 6-9% allocated into put spreads and all hedges left in place?
I mean it would effectively occur because we have covered calls in. So the covered calls would do that for us. We’d have an effective exit at $560 on the QQQ.
But I doubt we get up there. I shouldn’t have even rally me mentioned $620 at all. So the point I was making is that the last line before it’s a breakout into the next century mark is the $320, $420, $520, $620 zone. Realistically, if it got that high, it would probably count as a breakout.
But as you can see, the QQQ is having a lot of difficult cutting thorugh even the $570’s. $620 is 50-points from here. I don’t see how the QQQ will muster that much momentum right? Like it has been a struggle for weeks now.
Put it this way. The QQQ FIRST reached $556-$557 a whopping 27 sessions ago. It has managed to put on $19-$20 in gains in 27 sessions. That’s 3.6% in 27 trading days.
27-days ago was day 60 in the rally. The QQQ momentum really died down in the last segment. It was a very long segment without returns commensurate with the duration of the segment.
The QQQ is not going to draw momentum out of nowhere like that. The rally is already very tired at 87 days.
What I could see is a last gasp hurrah that doesn’t last very long and quickly reverses and that would be a surge to test $600 as psychological resistance. But I don’t think there’s enough energy in this stock to get it much past that and if at all.
Again, look how it’s trading today. It’s anemic. It took 2-days for the QQQ to erase 14-days of gains and then it took the QQQ another 7-days to recover those losses.
The momentum is dying down.
@Sam, what are you thoughts on Palantir?
It’s a high momentum stock. I think it actually performed really well in the last crash. Surprisingly well. Wish we had held it all this time.
But generally, we don’t invest in high P/E high momentum stocks.
Hi Sam,
Can you talk a little bit about the November 2023 rally which lasted 100 days? From the table, it looks like it was a 31.76% rally and the ensuing correction was only 8.07%. Was that rally similar to the current one? apologies if you’ve already covered this case.
So in the November 2023 rally, a huge part of the rally was spent trading sideways. It surged early on and then went sideways for a little over 5-weeks. It began off of a long 71-day correction that started in July and ended in late October. I attached the rally here.
The QQQ reached a high of $435.41 in early February and then spent 26-days or (5-weeks essentially trading sideways before ultimately peaking at $446.11 — a mere $10.70 (2.45%) above that $435.41 momentum highs. The rally essentially stalled out at $435.41 and at Day 74 and then it went sideways barely adding new highs.
The corrections as very quick. Really, the correction only lasted 6-sessions. It was 6 heavy days of selling with the QQQ falling from $443.12 down to a low of $410.10. We bought on that correction. I remember it. Everything was deeply oversold. I traded near-term calls on Nvidia and the QQQ off of that bottom.
Not only did we get deeply oversold on the hourly, the daily reached a 30-RSI on a closing basis. See attached.
By the way, I should add, this rally was very different. The first part of the rally was very similar. Similar explosiveness, but then the action between early February and where it peaked was very different. It was different than what we see in most rallies. It took a long time for the QQQ to peak. We don’t normally see consolidations like that. Realistically, that rally should have lasted closer to 80-85-days. Think of it like this. It reached a peak at Day 74 and then went on a 26-days segment that produced 2.45% returns. That’s nothing.
The average segment — even late stage ones — go for 6-8.5%. So the duration part is a little exaggerated in the Nov 2023 rally. Still, what Nov 2023 does have is a rally without any large pull-backs. There were two 4%+ pull-backs. Segmented rally pull-backs on the larger side. But that’s also because the followed big segments. That first segment in the November 2023 rally was one of the largest on record. It matched the strength of the first segment we observed in the current rally.
So they both started off similarly — though this one is much much stronger — and the Nov 2023 rally deviated as it approached day 76.
This rally is still surging. There’s no sideways action in this rally. Though the recent segment from $551 to $576 has been a bit on the weaker side. 6-days and 4.5% so far.
Bull Trap!
So every time there’s a segmented rally pull-back, there’s a retest. It would be nearly impossible to pull this data and even if we did, it would show that 80% of retests succeed in a breakout. Here’s why. Every time there’s a segmented rally pull-back, there’s necessarily a retest of the highs.
What’s important is the number of times we top at a 4th segment versus top at a 5th. And we’ve shown that all but 1 intermediate-term rally has had 3-4 segments. One rally had 5 segments.
So I’d say that inquiry is more important. Anytime the market pulls back, it must retest its previous highs to make new highs necessarily. And in that sense, there’s a retest.
Tops occur when the market pulls back, attempts another segments and fails. I think virtually every market peak occurs on a failed segment.
The only exceptions that I’m aware of are situations where we get massive reversals or a hard peak like ahead of the covid correction. with covid, we were rallying one day with insane momentum and the next day we’re crashing. That is the rare exception. we don’t see that play out all that often.
Hard peaks into reversals are rare. More common is hard peak, hard pull-back, a retest of some kind and then a sell-off.
Pull up a 3-year chart of the QQQ and you can eyeball that pretty easily. And then just change the dates for 3-years before that. You’ll find the retest route is very common .
We generally see peaks in one of three ways. (1) Sudden out of nowhere mid-rally; (2) retest route; and (3) long consolidations with heavy volatility like we observed ahead of the 25-year correction that occurred between February and April.
Those are the only three ways we’ve seen market peaks. Take a look at the attached. Circles are double-tops or retests; squares are consolidation peaks and triangles are hard reversals. This is just the past 3.5 years. But notice how every time there’s a pull-back and a move higher, there’s necessarily a retest. Meaning, the data would be overly positive 80%+ pointing toward breakouts. That’s why context matters a lot. Because that number drops when we’ve had 3-4 segments already.
Here’s the chart. Attached the wrong one.