Samwise Model Portfolios
The portfolios below are separated by launch dates. Each portfolio is entirely independent and has no bearing on any other model portfolio. We launch entirely new portfolios during each market correction as an illustrative tool for new subscribers who weren't present during...
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Should we buy the dip on nvidia yet?
So as we mentioned above, Nvidia generally pulls back off of overbought conditions. It reached $153 today, and pulled back to a low of $140. That’s about in-line with the size of a typical Nvidia pull-back off of overbought conditions.
However, Nvidia is NOT oversold right now on the hourly. What’s more, Nvidia at $140 is only $13 below its all-time highs. THat’s a mere 8.5% below its highs. There are much much strong entries. Obviously buying at the low $130’s or in teh $120’s would have been much much better.
The risk right now is that the market from a cycle standpoint is due for a correction. if the market sustains a correction, Nvidia is going to take a hit. In the last three corrections, Nvidia fell 25-35% each time from its all-time highs.
There are very very strong indicators suggesting Nvidia is close to a full-blown breakout. It tried yesterday. It tried again today. If it breaks out, it can run to $170 pretty quickly. Eventually that breakout is going to happen.
But again, the risk one runs buying the stock in the low $140’s is (1) Nviida is not oversold and could easily push to oversold conditions first; (2) Correction risk is high. So one would be buying with those two big overhangs.
P.S.: same question for pltr, meta, amzn 🙂
Amazon is 100% natural right now. it is trading exactly in-line with the QQQ and forming the same exact pattern. We’re not interested in Amazon because it is still really close to its all-time highs. For us to be interested in Amazon, we need to see a correction first. That’s just our strategy to buy on the cheap.
PLTR is a massive gamble. It’s a full blown momentum stock as I see it. With its P/E as high as it is and with the run it has had, it can easily pull back a lot more.
It is oversold on teh hourly chart. But since the stock has been one dimensional this entire time, who knows what that even means. It could mean, it’s about to take off. or the stock could easily see substantial greater oversold conditions.
I do think if the RSI does drop down to the 20-level, it could make for an interested momentum trade to be honest. But we’re not there yet.
I know PLTR has strong fundamentals. But I just don’t know enough about it from a fundamental point of view to forecast a price-target on it. 345 P/E ratio and the stock is trading nearly DOUBLE its 1-year average analyst price target
I’m not the best person to provide insights on PLTR as it’s outside the scope of what I usually do. I try to trade on assets with high viability/predictability. PLTR is not that. It’s a wild stock.
META, like Amazon, is near its highs. There is no “dip” to buy it. Meta hasn’t sustained a correction in a very very long time. For us, we’d be interested in Meta on a big pull-back that pushed it into oversold territory. It’s not there right now. It’s in the same exactly place as Amazon in terms of overbought/overosld and in terms of overall value.
Sam,
My chart also indicates AAPL~ $240 would be a good entry point. Hopefully we’ll see that this week????
If a correction is imminent, isn’t it better to just wait for the time being as we might see these prices down the line in any event. For the QQQ, we might see a rally to $545-$550 soon, but then that might fall back to $505 or so again given historical trend. Any risks with this view?
So there’s correction risk. It doesn’t mean we have to 100% for sure have one. We have evidence on both sides of the tape.
What’s the biggest evidence for a correction? The rally-correction cycles. You can read all about that here:
https://sam-weiss.com/investing-basics/chapter-5-2/
So this I think represents the strongest evidence we have that a correction is on the horizon.
However, one can make the argument that a correction has already happened. The QQQ fell 6% from its prior peak. While that makes for a very small correction, one can argue that it counts. The QQQ peaked at $538 and change, and a hit low of $505 and change. And it did this over a period of 12-days. Look at the table we included in yesterday’s daily briefing. That’s a big argument. it would make this the 6th smallest correction going back to 2010 out of 38.
One could counter that by saying “look, while 6% is technically on the correction table, the QQQ never reached oversold conditions on the daily, the selling itself was really minor compared to the previous corrections and no real opportunity emerged.” While the QQQ was down 6%, there weren’t a lot of stocks off of their highs. Amazon, Meta and the like are barely even down. What’s more, the other 5 events where the QQQ only dropped 6% had extenuating type circumstances. Two of those corrections were melt-up rallies. They don’t really count because the envrioment was very different. The corrections were inherently smaller in melt-up rallies. Then August 2010 was also a special case due to QE2 and the fact that we were still a good 30-40% off of our all-time highs in the market. It was super early in the bull market cycle. We’re late in this one. The QQQ usually adds 50% in a bull market from the previous highs. The previous highs were $398. we’re at $540. We’re getting close to that 50% mark. So we’re far along in this bull run.
Also, there have been no RECENT cases of the market only dropping 6% on a correction. All of the recent model-date cases go for 7.7% or greater. And the only time we had one at 7.7% was due to the fact that a full blown 15% correction had occurred only a month prior. So even that 7.7% pull-back had extenuating circumstances.
Still, the bull might counter that a stat is a stat is a stat. And the reality is the QQQ dropped 6% which continues a correction. It not only dropped 6%, but did so over a 12-day period. So it meets both the duration and retracement criterion for a correction.
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So you see, the risk is high right now in both directions. It’s not obvious that we haven’t had a correction already. My gut feeling says no because what this correction lacks — that EVERY OTHER correction has had — is the QQQ never pushed oversold. We got to oversold conditions on teh Dow. We didn’t get there on teh QQQ.
Retracement wise, 6% is very shallow after a massive 20% rally. Really, retracement are supposed to give back half the gains of the preceding rally. And what history has shown us is that when that doesn’t happen, we end up doing it later anyway.
That happened in April. We only sustained an 8% correction after a massive 30% rally. Well the next move up was smaller and then we sustained a 15% correction in July. So the rally was shorter lived and we ended up sustain a more realistic correction in July-August.
That can happen here.
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Investment strategy wise, here’s our thought process. If we’re lucky, the QQQ might retace back down to the low $500’s again and it may reach oversold conditions.
If that happens, we’ll launch Stark and Frey portfolio and take initial positions in stocks we feel are undervalued at the moment.
Now since we didn’t get a full blown correction as we’d like, we’d probably only allocate about 50% and we’d hedge early. The hedge would protect the portfolio against a real correction and allow us to reposition at the lows.
What we get in return is we’re long ahead of another potential larger rally toward $600 or something like that. Intermediate-term rallies go for $100. If a correction has already occurred, we could be in for a $100 rally on the QQQ from $505 to $605. And it would be extremely painful to be on the sidelines for that for the new portfolios.
Obviously, for everything else, it would be a big party. we’d crush it in the other portfolios that are already currently long. But for Stark and Frey, it would be shitty.
That’s why my thinking is go at least half long and hedge early. In low $500’s, we’d be buying at a 5% pull-back off the peak anyway which is about half way through a correction right.
A correction low point from $540 is closer to $485-$490. Really, there’s a big gap to fill down near $470. A major correction to fill that $470 gap makes some degree of sense. Whether that happens remains to be seen. Based on the selling we’ve been seeing right now, I’d say no. The bears have to kick it up 10 notches for that to happen.
Hi Sam,
If the correction does happen won’t AAPL get pulled back even more beyond $240? The rest of the week is filled with important meetings and today’s numbers are coming in hot so it seems those who want to buy should buy with heavy caution
So we’re trading Apple for the near-term rebound that follows off of oversold conditions. Apple can easily rebound/rally way ahead of a full correction taking it lower. At the moment, we are going to add, but we need to see oversold conditions again. That is likely to spark a rebound in Apple specifically.
And Apple can outperform. Take today for instance. With teh QQQ down 1.8%, Apple is only down 1.2%. And that’s because it’s sort of ahead of the QQQ at the moment.
If the QQQ reaches oversold conditions on the hourly, it will likely rebound pretty big and that rebound is likely to correspond with Apple’s rebound.
It’s just all timing.
Baratheon is a trading portfolio. The key is to trade in and out of positions. Also, it is a substantially higher risk portfolio and why it has 1/10th the allocation as the others.
Sam,
So there might be a chance AAPL doesn’t touch 240 near term，would you just keep the current single trade or would you still get a second pack of the March 240 call at some point?
We’d play this conservatively. Meaning we’ll likely just hold the single control. For us to buy a second contract, we want optimal circumstances.
That means we really want to see the QQQ push oversold and for Apple to reach the 50-day $238.
See end of the session update (3:50 PM).
saw it and understood, thx
With Apples hourly RSI hovering around the 30 mark you mentioned, and the QQQ hourly RSI low – would you expect a rebound early tomorrow?