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Sam,
AAPL touched 235 ，seemed to be a bottom， no?
We’re not going to buy it right now. There’s too much market related risk at the moment. Under the right conditions with it reaching oversold on the daily or the market reaching a critical low point, then we’ll add to it. right now, it’s only a 12% position. So a relatively small allocation. But if we add to it, then the risk skyrockets. So we have to wait for the most optimal entry to add. Got to be patient.
It’s fine if Apple takes off and we close out the position for a small gain at $250 or something. That’s fine. What isn’t is increasing our risk in sub-optimal circumstances. So that’s where stand right now. We hold our current position. If the market rolls over into correction territory and Apple gets deeply oversold, we add to our Apple position. If it doesn’t then we just sell the position we have on the rebound.
That totally makes sense; I’m learning how to mange risks from you. Will follow your action on this trade. thx, Sam
Apple is at a 35-RSI on the daily chart right now. It’s getting close to 30. And Apple has a very long history of rebounding big time on 30-RSI daily. So we’re getting close to a critical buy point.
historically, I used to put on Targaryen type trades when Apple reaches a 30-RSI on the daily chart. Made a lot really strong trades doing that.
I pulled back on that by the time we reached 2021-2022 as Apple just didn’t move as much as it used to. As it matured, we just didn’t get the same volatitly that we used to go. But recently, it is trading similar to how it used to trade when it was still growing.
The point is that once Apple reaches a 30-RSI, we have a much much higher likelihood of a large rebound.
I see, at 30-RSI, Apple could reach 230, just by looking at the chart.
(11:05) To me today looks a lot like July 24 2024.
Similar : retracement, daily and hourly RSI (just a little less bearish), VIX on the hourly and daily is very similar too.
Here QQQ on July 24 2024 with the arrow at 10:30.
Compare with today (Jan 10) at 10:30.
As Sam pointed out an hour or so later, QQQ kinda held instead of falling right through.
So for actually launching the new portfolios you would like to see a 8-10% correction and/or QQQ oversold on the daily?
I would appreciate that actually since I would feel much safer that way than simply buying positions now at 505ish.
It’s a balance of risk and opportunity. The risk we run by not buying ANYTHING is that we’re underexposed and the market can run for very very long periods of time before it corrects. Really, the average year only has 2-corrections. That has been the case historically. This is a more volatile enviroment because the market is pretty far along in the bull-bear cycle overall. But ideally, we wait for a full blown correction as per Rule #2 of the Samwise Rules, and go long then. But right now we have a non-standard correction where there’s genuine risk the market may not fully correct here.
So we may buy half positions soon and then sit in half cash.
If we weren’t at risk of correction would Apple be a good trade for the Targaryen portfolio?
No. Not yet. So with Targaryen, we want oversold on the DAILY chart. It may be good for a small trade. Not a main trade. The reason we’re looking at Netflix is becuase it is almost oversold on the daily coupled with the $1,000 psychology. Those two things together sort of make for a strong set-up.
Apple would be a Targaryen worthy trade if it reached oversold on the daily chart. I have an even longer table and much much deeper oversold analysis on Apple. Apple is one, that like the QQQ, rallies massively after reaching oversold territory on the daily.
Sam, what is your current level of confidence in the market hitting that 8-10% correction range?
Much much higher than yesterday that’s for sure. I don’t like that the market had to go through this long nonsense of falling to $508, rebounding to $531, retesting by falling to $505 only to then rebound to $527. We really haven’t seen anything like that in this bull cycle. We’ve sen something on a smaller scale. And here we are on a third leg down.
The third leg down increases the odds that we’re going to see a correction. But if the market rebounds back up to $520, I highly doubt we’ll come back down for a fourth try. That just doesn’t happen.
So right now the risk is really really high on both sides of the equation. While a third leg down typically means it’s likely going to break down — as triple bottoms are rare — if it does bottom here and goes back up to $520 again, I don’t think we see a correction. or at least it’s postponed until after another big segment at that point. we’d be in novel territory with a fourth push lower.
I like that the QQQ is trading at $505 right and getting comfortable at those levels. Every time we’ve come down here, we’ve spend minutes down here and the market has immediately retreated back up. This time we’re spending time down here. So that increases the odds as well.
With today being Friday, what we’d like to see happen is the QQQ to roll over to $500 or $501 or something like that. Better if it closes at $500-$501. Then on Monday gapping down to $495 — not unusual as the fear festers — would put us right into correction territory. That’s 8% down. At that point we can start shopping with some confidence.
While the market may end up rolling over in a larger correction, generally speaking, buying at 8% down lowers our overall risk. Especially if we’re doing so on deeply oversold conditions.
A big reason we want hourly oversold conditions because it typically leads to a rebound — even in corrections — which in turn gives us the opportunity to hedge.
If we hedge at a higher price than where we enter, the hedge is usually very solid and is going to protect the portfolio.
For example, if we buy the QQQ long at $495 and buy puts to hedge at $505, we’re likley to have a fully protected position that produces profits no matter which direction it goes at that point.
So that’s the advantage of buying oversold.
Buying oversold daily means we get a major 10-15% rally over a multi-week period and can expect a total of 15-20% when all is said and done (over 70 trading days on average).
Thank you. I appreciate your care in giving a lengthy response. I’m really stoked to see how this year plays out. Thanks for creating this site. Thanks to you, I feel like I have some navigation in what is often a confusing and tormentful sea for the average investor.
Bears losing control 😮
It’s funny to me that you commented this right at the moment they took it back. Thanks for the push, haha.
Lmao! This right here is why I subscribe to Sam
Do you think the upcoming options expiration plays a part in the current regressions from the peaks? Perhaps a thing about shaking the tree of money from people locked into positions…then maybe it’s back to business as usual?
Hi Sam, any thoughts on AMD? The stock has taken a beating recently, and it looks like with 50%+ projected EPS growth in 2025, we’re looking at 12M forward P/E ratios below 25.