Samwise Quick Reference Handbook
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Hey Sam, how are we feeling about those vertical spreads?
Which vertical spreads? We feel fine about everything we’re doing right now.
The QQQ call spreads. Glad we’re feeling fine. This is an interesting time to join the site!
What’s the plan for the long-term portfolios once we hit the correction bottom? Are there any plans to launch new portfolios since Frey & Stark are already heavily committed?
No. we’re going to add to our Frey & Stark portfolios. Thye’re not fully invested yet. We launched those at the start of the correction when the QQQ first visited $500 back in early January. This is all part of the same overall sell-off.
For us to get fully invested in Stark & Frey, we need capitulation. $NYMO -100, oversold QQQ, overbought $VIX and 10% down for the correction.
Damn. We actually have a lot of these. what gives me pause is that the QQQ doesn’t normally just sell-off in one single leg like we’re seeing. That’s very atypical.
I have to go back and look at some other past corrections and see if there are any past cases where the QQQ has sold-off more than 10% in just a single leg down. I think the closest thing we have to that is what happened this past March. But that was only 8.9% I think.
Some of the tarif events were already baked into QQQ, but I think most of it wasn’t. At the moment we’re sitting at -3.6% from where we were yesterday before the announcements. In October 2018 we had -6.7%. I think we will see some more.
That four-legged Oct 2018 correction was roughly -23%.
P.S. The first leg (usa-china tarifs) was -10.4%, which is very similar to where we are now.
So we wait for this sell off or it was this morning and already finish ?
I dont understand the market these days… A lot of traps… Very atypical.
So the market is going to see a big rally first. And then very strong chance it has another big drop and that’s it.
Two different things. Big rebound. second big selloff. Then big long-term rally afterward.
hey Sam, what are your thoughts on NVDA? It doesn’t stop bleeding.
Nvidia is tied to the market. Everything I discuss with regard to the QQQ directly impacts Nviida. Nvidia will rally the minute the market rallies. It’ll just rally more than the market.
Seems like an attractive price right now and strong support at $110. Is this not a good time to add Nvidia to long term portfolios? Or are they too heavy already on it?
So all of our long-term portfolios are set. we’re not adding to them at all. All we’re doing in our long-term portfolios is selling covered calls against our positions and hedging when possible.
For Stark and Frey, we are adding. but not yet.
Thanks Sam. Yeah, I did mean Start and Frey. Today morning seemed like a fire sale, but I will defer to the guru here 🙂
for the qqq spread on watch, what would be a no regret entry price so that I can set up an autobuy? totally understand that it’s a fluid situation and just trying to get a sense. thanks Sam
As Sam explained yesterday, I think that’s one of the question he can’t answer.
So this is still a single leg? Maybe that bounce from 498 to 512 although very short lived was it?
There’s a lot more to it than price. There’s a major time element and a handful of hours of upside doesn’t count for anything. If the rebound doesn’t register on the daily chart, then it’s all part of the same leg down.
The rebound is something that should unfold over 3-5 days. Not just 3 hours of trading. You’re missing the time component here.
Ah okay, thank you! So it dropped 52$ straight, pretty massive!
Is this a good opportunity to deploy some dry powder or are we sitting it out for now?
Thanks for considering our emotional states and re-establishing our confidence through data!
Hey Sam,
Can you elaborate on why NVDA needs to close iut at 110 on the hourly? I’ve noticed you mention this other times with other stocks as well (e.g. it needs to be oversold on a closing basis) and wanted to understand the significance of that with the markets (e.g. algo trading strategies looking at data on closing basis to make trades)?
For the hourly to register on the chart as having reached oversold, it needs to close out the hour oversold. it does’t absolutely have to do so, it just makes it more compelling. Because it’s not registered as actually oversold. But it can rally without doing so.
In fact, it’s way overdue. By the second instance of oversold, it’s a ticking time bomb at that point. We just get a more confident trade if closes out the hour oversold. It limits the downside.
In terms of what Algos are looking at, that I’m not 100% sure about it. They’re all going to be somewhat different. I’m basing my inferences off of empirical observations and trend data.
When you look at the historical trend on Nvidia, that’s how it trades. When we look at it historically, anytime we see a registered deeply oversold stock, it rallies big time. And there’s an extremely high correlation there. High enough that it’s not just mere coincidence.
Now different stocks have different thresholds. Some stocks never get oversold or when they do, it’s a rare event and they explode higher. Others like Nvidia reach oversold all the time and consistently really off of that.
The QQQ is one that is extremely consistent. Anytime it reaches oversold, it almost always immediately rallies.
If it reaches oversold on the daily, the rally is significant and prolonged.
So if I’m understanding this post correctly. You’re basically saying, irrespective of if we’re in a bull or bear market. We’ll expect a rally from the conditions the QQQ is in at the moment and since B + T portfolio are designed for momentum trading, these trades will basically be a short-to-medium trade in and out for a cash grab basically.
So I’m saying this. The QQQ normally bottoms ahead of a 10%ish bounce within 1-day of reaching a 30-RSI on the daily 50% of the time. HALF the time when it reaches a 30-RSI on the daily chart, it bottoms that day.
During bull market cycles, that number increases to 70%. During bull markets, when we have a correction, it’s usually bought up. That’s why the QQQ has difficult ever reaching oversold to begin with. When it does, it bottoms that very day.
It bottom on August 5 the very day it reached 30-RSI for example.
Not saying that’s going to happen here. I’m saying that add to the strength of the overall trade we’re in. It adds one more indicator.
Also, I’m trying to add perspective. We’re in May expiring options. May expiration isn’t for another 50 days or 10-weeks. By that time, we could easily see the NASDAQ-100 rally way beyond its all-time highs and in fact, during the first 1/3 of the rally, we’ll produce more than half the gains of the full rally. Most of the gains are front loaded.
And now we have 10 contracts in the May $525-$535. That’s an even stronger position we’re in because there’s a very strong chance the QQQ will be north of $535 by that time. And if the QQQ spends ANY time at all past $535, our position goes up 120% minimum.
So that’s the perspective we’re taking
I am assuming it’s unsure at the moment wether we will get a rebound to the midline and 2nd leg lower or wether the market bottomned here and just rallies straightaway?
So our position right now is that we get a rebound to the mid-line followed by a second leg lower. Though the longer this goes on, the more likely it is that we have just 1 legged correction. That’s because we’re getting closer and closer to reaching full bottoming indicators.
Thank you!
Hello Sam,
NVIDIA was a trap today 110$ to 117$ ?
Do you wait to see 110$ again to buy or did you buy already ?
So we didn’t buy today because of allocation risk. we just didn’t want to get too long. But it was a ripe set-up at at three instances of oversold. Like if we weren’t already as invested as we were, we would have bought with two fists.
When the market has a second leg lower, then we’ll buy at that point.
Second leg lower is soon or in weeks / months ?
Is it too late to buy ?
Within a week of the full rally. So I expect a bigger rebound that lasts for 3-5 days and then another hard leg down.
Rallye to 130-135$ these days then go again to 90-110$ ?
Sam, a totally unrelated question to today’s action : what is the name of the style(s) of trading that you practice ?
Contrarian. But I think it’s kind of unique. I don’t see a lot of people out there doing exactly what I’m doing.
But as a grand category, this is contrarian becuase we’re making trades contrary to the current trend.
If you sell short thinking the market is going to drop, that’s contrarian (dangerous). If you buy thinking that the market is ready to rally, it’s contrarian.
If you buy after the market has rebounded off the lows and feel like we have confirmation of a new rally, then you’re trading with the current trend.
So a trend buyer might buy right now and add as stocks go higher. I buy and add as stocks go lower on the expectation that it’s going to reverse and go ahead. I then reduce as the market climbs.
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But this is trading only. For our core capital, we are a long-term buy and hold investor who hedges our positions and sells premium to reduce basis.
So we are mother bull with a small bear kid ?
Awesome stuff. How did you get your trading knowledge? Were you a professional or self-taught? Do you have any books you recommend for someone who wants to dive deeper into this type of trading?
Sam, has the rebound process started? I was expecting another red day and QQQ cratering at $480-485 but was violently pushed back to $499 (so I missed the opportunity to add more QQQ call spreads).
We won’t know until it fully develops. It looks a lot more likely here because of the bullish hammer. However, we are expecting another down leg afterward. We’ll see if that happens. we won’t know what’s what until the market actually keeps moving forward and takes it to our price targets.
Sam, when you said QQQ RSI needs to reach the mid line before we make any decision to reduce the positions on the rebound, did you mean daily RSI or hourly?
Hourly RSI. And we need to be well above the mid-line.
Hey Sam, any idea why the market plummeted before close? QQQ lost 8 points in 30 minutes lol
Sweeping in their profits before the the big speech tonight?
Same question.
Thanks for the explanation above.
Retest and volatility. It’s all good. It claw that all back. The market is setting up really well for a larger rally. We’re nearing the end of this whole stretch. The evidence is piling on and today’s last big of selling adds to the overall picture. If we’re down tomorrow, we have more confidence adding tomorrow than we did today.
Do you have any words of hope for someone who bought NVDL on the 20th, literally the day before the stock started dipping? I know it’ll come back up eventually, so I’m trying to stay calm, but I’m worried about the second leg lower meaning that it’ll take even more time for me to recover
Stocks don’t expire. I did this too with NVDL. Average in if you can while it is $15 lower and reduce when it comes back up for the rebound – similar to Sam’s plan for reducing spreads at the rebound.