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If we hadn’t sold the QQQ April 530 calls previously at 15.50, would it be wise to sell now or just hold?
If we were still holding those calls, we’d sell premium against and create a spread just like we did with Apple. that would allow us to continue to hold the QQQ’s for more upside profit while protecting us against the potential for a sharp pull-back. Right now, for example, the QQQ $550’s for April are trading at $10.00. We’d probably sell those creating a near free call-spread
We’re sitting on 60% cash in Stark. Is this context, is there anything useful we could do with it at this time?
In “now” I meant from Monday+.
So we’re only at 44% in Frey and 40% in stark. In terms of our Nvidia positions, we’re 2/3rds in. For now, we’re going to wait until a clear opportunity arises. We have Microsoft kind of on watch at the moment. If Microsoft starts moving lower toward daily oversold, we’ll add it to both.
(11:00) QQQ is nearing overbought on the hourly.
Sam do you subscribe to Max Pain theory? If so, the price of NVDA is 100% engineered seeing that MP is 125 and it’s sitting at 124.85 last I checked, perhaps the “real” move will be seen immediately in the AH
I think it would be really difficult to manipulate a large company like NVDA with any consistency. Obviously there’s plenty of really strong evidence that it does actually happen. Plenty of stocks do close right at max pain. But look at this week for example. there’s no way max pain was sitting at $125 heading into the week with Nvidia trading at $143 last Friday.
The options-related manipulation is very limited. If Nvidia wants to run, it’s not going to be held back due to max pain.
There are literally millions of investors who don’t care or pay attention to option interest. So imagine if all of these people step in and buy at the same time, there’s nothing anyone will be able to do to manipulate the stock.
I do think where it does come into play is when Nvidia is trading at lower volume and there’s low volatility going on in the market.
And if there’s options pain coming up within a few days and Nvidia is already close to the strike, it could be held back or move forward depending on where options pain lies.
Thanks Sam!
Hi Sam!
I know you haven’t gotten around to writing up your Investing Basics material on technical analysis, but are there types of chart patterns you’ve found to be useful when navigating the technicals of the market? I ask because you’ve mentioned the inverse head & shoulders and others in the past. I want to get an idea of what patterns I should study up that have been proved to be reliable / consistent in the past. Thanks!
So chart patterns are of very limited value. They probably fall under overbought/oversold and momentum indicators. There are some patterns that do add evidence or strengthen an argument for a direction.
And it’s because those patterns reflect something inherent about human behavior that make is work. So like the inverse head & shoulders pattern today for example. The reason it works is because when the market makes 3,4,5 attempts at a certain price level and that level is held, buyers become more confidence and sellers less confident.
Head & shoulder is the same thing in the other direction. You make so many attempts to take out the highs, the market eventually goes in the other direction.
So there are patterns that help and they often speak to something intrinsically going on in the market.
So we’re going to cover “Understanding the Stock Market” once we get through a bunch of other things. There’s a long list of things I got to get done first.
Finishing the plugin was big. It dominated almost all of my time related to this website. Now that that’s done, I’m working on finishing the mobile app, so I can upload it. Then we’ll finish this here which is of hte highest importance in terms of content:
https://sam-weiss.com/samwise/samwise-strategies/
Then we’ll finish up investing basics.
Pause to update the Nvidia financials page hopefully before earnings comes in. That stuff is almost done.
Once we get through, we’ll turn to the Understanding the Market material. The Understanding the Market materially isn’t as involved as is investing basics.
Apple trickling down like you said but still not oversold!
yeah we need it to get down $230 maybe. It’s at a 42-RSI right now. But it has bottomed on an intermediate-term basis. So we’re going to be golden.
The risk for us right now is that we fumble covering hte $250’s and aren’t able to add to our position down here.
Hopefully it will push oversold. Becuase then we could really push the needle. Covering the $250’s and being able to add to our $220’s would be huge ahead of a rebound.
So we just positioned ourselves to capitalize regardless of what happened after earnings. We sold the $250’s to reduce our risk in the event Apple sold off. We also closed the March $240’s for the same reason.
If Apple rallied after earnings, we get to continue profiting up to $250.
If Apple falls after earnings, we can BOTH back buy 1 contract since we dumped the March $240’s AND we can cover the $250’s.
So it’s not so much that we forecasted a drop. It’s more that we positioned in a way to all us to capitalize regardless of what Apple does.
We do feel there’s going to be a second large leg up due to Apple reaching oversold conditions on the daily, the breaking of the downtrend and due to the stock near oversold on the hourly.
Also, good earnings and being a fundamentally sound company helps.
Does the tariffs announcement worry you at all? Or do think it’ll push QQQ/NVDA to oversold and they’ll rebound from there?
No, not really it’s reflected in the market already. If tariffs end up having any sort of an impact on the economy, the fed will essentially account for it in their monetary policy.
Like if the feds see an impact from tariffs due to companies passing those extra expenses on to the consumer, they will likely act to curb that impact.
In terms of market sentiment, it’s already built into the game. The technical’s reflect the market’s feelings about it.
are the Taiwanese tariffs part of the previous discussion? I had a glimmer of hope for the meeting with Jensen and the president, but I don’t know anymore
Hey Sam,
How can I add the orange dashed lines overlay like you have on your stockcharts screenshots?
I greatly appreciate your work. Thank you.
So assuming you have a paid account for stockchart.com, the way to add overlays is to box/square annotation, and then select the option to fill in the box. Then you need to ensure that it’s transparent or the box will simply cover up whatever you place it on.
I’m not sure which features are available on the free account in terms of annotations I’ve been subscribing to stock charts for 15+ years. So I don’t remember what’s available on the free account.
Thank you so much.
We had a bit of a reversal in both the SPY and QQQ, and the QQQ is slightly down for the week. Does this change outlook for intermediate term rally you mentioned at the beginning of this post?
So the QQQ is an uncertain territory right now until it breaks through its highs. But each time it makes a move back up to 530 increases the odds that that is going to happen. What’s more? It’s not a good thing for the bears when the QQQ drops 3.6% on a session to start the week and then can’t manage to make new lows.
For us, if it comes down and gets over sold again, then we’ll buy. It will be a pleasant surprise for us.
If alternatively, it breaks out about 538 to make new all-time highs then that’s when we shift a momentum trading.
The reversal today definitely helps the bears obviously. In terms of forecasting, there’s no obvious direction at this particular moment. If the QQQ gets overall, then it will clearly bounce again just like it did this week.
If it rallies next week and pushes through its all-time highs that cuts in favor of the argument that the QQQ is on a new intermediate term rally. I don’t think we could ever say for certain that we’re on a new rally until the QQQ actually takes out the highs.
Until that happens, all we have is strong evidence that cuts for and against. And all we can really do is trade the situation when it’s clear that QQQ is going to rally near term. Kind of like we had on Monday morning.
Sam, you said in your article that QQQ won’t likely go to pull-back a sixth time. If this happens due to current events, is it possible to go lower than last Monday? Would those pull-backs build up a massive rally later?
I think we continue to see these cycles without a break to the upside soon, it’s going to lead to a broad potentially topping process ahead of a larger correction.
So if the QQQ rolls over here back down toward the low $500’s and then rallies again without breaking, then we sort of enter a period of uncertainty. These volatile swings are good for us. They open a lot of really strong trading opportunities.
Sam do you still hold the same sentiment with what happened at market close today, giving up all of its early morning gains? Do you see us breaking down toward 110?
Hello Sam,
Can you precise leg power in NVIDIA when you said
“With the QQQ getting closer to overbought conditions, we could see a pull-back in the market that could coincide with another leg lower in Nvidia. If that happens, then we’ll add”
Is it less than 115 ? 90-110 like in August ?
Best
Karl
90-100 is a LONGGGG ways away. It would take A LOT of bad information, negative sentiment and heavy selling to ever get down there again. Not to mention the strong support at $110 and $100.
Remember, in August, the QQQ spent only minutes trading between $90-$100 I a major capitulation event.
So I think a drop to $90 is unlikely right now. We’d need more negative news for that. With the news we have now, I’d say NO.
—–
In terms of where we could go from here, Nviida is at a 40-RSI right now. So it has a bit of more downside before it reaches oversold again. It’s hard to gage exactly where it would hit oversold at this point. But I think we’d need to see it down near $115 to become oversold again.
It would reach deeply oversold at $110. So if it does move down to oversold territory it would be somewhere between $110 at the extreme low end and $115 at the moderate end.
It’s important to remember that this would represent the SECOND instance of oversold which skyrockets the probability that the low is in or very close to the level where it reached those oversold levels.
So say Nvidia reaches extremely oversold at $112, then it means that even if nvidia rebounds again and falls again $112 range ($109-$114) would be the ultimate FINAL low.
Thank you for your quick and detailed response. you are someone with experience, don’t you think that there is a wolf in this matter of investigation into nvidia and deepseek? the buying flows this week on NVIDIA have been incredible… what if all the small carriers were shorted?
“90-100 is a LONGGGG ways away. It would take A LOT of bad information, negative sentiment and heavy selling to ever get down there again. Not to mention the strong support at $110 and $100.”
You think we might be living one of those events presently?
Hi Sam, I saw a technical analysis in WSB about SPY’s fair value curve on a monthly graph, and how it show’s the likelihood of an incoming 20% correction.
I noted how the SPY drops and bounces on OP’s fair value graph, and wondered if we’re bound for another bear market from how overheated the market is.
I’m a bit too exposed to handle a bear market, but in the event of something similar to the mid-2022 descent, do we have strategies to carefully navigate?
So just understand that this chart gets thrown around a lot. It’s a chart of the S&P 500’s P/E ratio over a very long period of time. We’re talking a multi-year chart. So in terms of a forecasting tool, all one can infer from this is that there MIGHT be a bear market sometime in the next 3-10 years. It’s a very long-term indicator.
We can stay above a 30 P/E for years and what’s more, the dynamic could easily have changed where the market decides that 30 is now the new normal. we’ve seen it before.
—–
So I’d advise you to ask a financial advisor about how to protect your specific portfolio and positions with put options.
As an example, our portfolios are set up to handle a bear market at any moment. Take a look at Arryn or Lannister or any other long-term portfolio.
If the stock market crashed 40%, we’d be green in all of those portfolios. That’s because we’ve hedged those portfolios with a small amount of puts that can handle a large bear market.
If the market rises, we make on the orders of several magnitudes more than we lose on the puts since the puts are a very small portion of the portfolio (5-10% at cost and even less at market value). We’re up nearly 80% in arryn for example. If the market crashes, our puts rise so much that they off-set the loses we sustain in a bear market.
So it’s critically important investors ensure thier portfolios are hedged against the potential of a bear market.
Here’s the most important lesson anyone can learn from this newsletter. We have a whole Chapter dedicated to this issue:
https://sam-weiss.com/investing-basics/risk-management-1/
Chapter 3.3, 3.4 and 3.5 cover this.
The big lesson is this. The stock market rises far far more than it falls. It’s something like 67% green to 33% red. What’s more, over long period of time it rises hundreds of percentage points due to the expansion of the global population and due to sharp increases in the standard of living. Corporations make more money due to those two factors which leads to sharp increases in inflation and hence investible assets like stocks.
Okay. So the way to generate wealth is to get long and stay long. hence Arryn, Lannister, Stark, Tarly, Tyrell and Frey.
The problem is, bear markets happen every now and again. So how do we protect ourselves? if we sell, we miss out on teh massive constant move higher and get left behind. If we hold, we may get crushed in a bear market.
So the way to handle that is to insure your portfolios against the risk of a bear market to allow you to remain long at all times. Through corrections. Through negative sentiment. Even through this idea that the S&P 500 is too overvalued. That’s entire underlying principle of Sam Weiss. That’s the whole thing.
Get long, stay long. Be hedged against the bear. Read rule 8. We’re currently working on a summarized version of chapter 3 and will publish it soon. It will be called “Embrace the Bull, Hedge the Bear”
https://sam-weiss.com/samwise/samwise-strategies4/
Hi Sam, I appreciate the quick response especially on a weekend! I do intend to stay long, but since I joined on Stark, I may have exposed my mental state to leverage as well. That’s my fault, and will own up to it!
It really helps that you respond to our comments and give us decades worth of insight.
So Stark is still about 40% in cash. So it hasn’t allocated fully yet. We’ll end up hedging it when the time is right.
The 40% cash and ultra long-term positions act as a sort of hedge at the moment. Also our entries in stark options — like the QQQ — is way below Friday’s close. So we have pretty solid entries. Same with Apple. We made our Apple entry down near $220.
So we already bought these positions at significant levels below the highs.
Hi Sam! No rush at all, but when you get a chance could you add a Q&A section to Chapters 2 and 4? I have a bunch of questions about DITM leaps and spreads that I’d love to ask 🙂
Done. They’re all up through chapter 5.
Looks like QQQ might open < $515. Futures are pretty red.
If we get some big pull backs tomorrow would closing out any of the calls we sold for call-spreads be a prudent move?
It really depends on how things open. The only calls we really have to cover would be the Apple calls.
The Nvidia call spreads in Targaryen are going to be held as spreads. We might add to them just as we reduced exposure on the previous rebound.
In Baratheon, we might add to Nvidia and Microsoft. For Apple, we might cover the $250’s. Again, that will really depend on what Apple does tomorrow. Apple might not be oversold.
Then if the QQQ is oversold again, we might go long the QQQ.
I’ve seen deep red futures like this fully recovery. So it’s really early in the process.
We’ll have a better sense in the AM. One thing we really need to do is cover at least part of our February $530 covered calls in the Arryn portfolio.
Now that we’re in February, it’s time. They probably are gonna lose a lot of value if the QQQ is down in the low 510s area. So that’s a big one that we have to do.
Arryn is the last long-term portfolio that still has covered calls sold that we haven’t covered.